Finance Minister Sri Mulyani Indrawati stated that expanding the application of local currency settlement (LCS) with various bilateral partner countries could facilitate greater trade and investment. "This is to facilitate greater trade and investment," she said at the G20 Agenda in Jakarta, Wednesday. Sri Mulyani said that currently Indonesia had implemented SCS with several bilateral partners such as Malaysia, Thailand, Japan and China. She explained that the purpose of implementing the LCS was actually to reduce the heavy dependence on a single currency, especially the United States (US) dollar. "This is actually very important to increase the direct settlement of transactions using local currency," she said. In addition, the implementation of the LCS is also expected to create better trade and investment relations between countries including Indonesia and ASEAN countries.
According to her, by implementing LCS, transaction costs will be lower because traders do not need to convert their currency to the US dollar exchange rate. She also appreciated Bank Indonesia, which since 2018 has been trying to implement the LCS with partner countries, especially since this step was brought to the global forum, namely the G20, so that its implementation has the potential to be expanded. She said if the implementation of the LCS was extended to a global level, it would create a financial safety net between countries and reduce the risk of vulnerability due to global economic shocks that cause financial instability.
“With currency diversification, it is hoped that support for macroeconomic stability can be strengthened and the economic recovery process can be sustainable. Not only for each country but also globally," he explained. LCS is the settlement of bilateral transactions between two countries carried out in the currency of each country where the settlement of transactions is carried out within the jurisdiction of the respective countries. The implementation of LCS is carried out through Appointed Cross Currency Dealers (ACCD), which are banks appointed by the authorities of both countries to facilitate the implementation of LCS through opening currency accounts of partner countries in their respective countries.
