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Indonesia Advocates for ASEAN’s Local Currency Transaction Network Expansion

Indonesia, as the chair of ASEAN this year, is prioritizing the expansion and improvement of the region’s local currency transaction (LCT) network. This initiative aims to strengthen trade and investment, streamline cross-border payments, and enhance financial asset substitutability.

Savitri Hafid, the Director of Bank Indonesia’s International Department, emphasized this focus during a recent discussion. She stated that “supporting the growth of the LCT network can significantly boost economic engagements within ASEAN.”

The importance of LCTs for the region has gained unanimous agreement from ASEAN leaders. As a prominent economic bloc, ASEAN believes that promoting intra-regional trade and investment using local currencies can reduce reliance on major global currencies, resulting in potential cost savings and reduced exchange rate risks.

In pursuit of this goal, the ASEAN Finance Ministers and Central Bank Governors have committed to establishing a dedicated task force. This task force’s role will be to advocate for local currency transactions and establish guiding principles for the creation of the ASEAN LCT Framework. This framework will ensure standardized and streamlined LCT practices across member nations.

In addition, Hafid announced plans for ASEAN nations to collaborate in the area of payment systems. She stated that within the next three to four years, all ASEAN members are expected to ratify a Memorandum of Understanding dedicated to interlinking their payment systems. This connectivity will be a significant step toward achieving a cohesive and integrated ASEAN economic community.

While macroeconomic policies and other financial tools are vital for regional stability and growth, the specific focus on local currency transactions demonstrates the evolving dynamics of intra-regional trade and investments. ASEAN aims to not only strengthen economic ties but also build resilience against external financial shocks by championing LCTs.

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