Indonesia’s central bank has spoken out against the use of the US dollar in export-import transactions, and called for a switch to local currencies in international payments to reduce dependence on the greenback, news portal Tempo.co reported on Friday.
Most of Indonesia’s international trade transactions are conducted in foreign currencies, predominantly the dollar, according to Nugroho Joko Prastowo, head of Bank Indonesia’s Solo Representative Office, as cited by local media.
“90% of export-import settlements are in US dollars, when in fact the value of Indonesia’s direct exports to the US is only 10%, and the value of US imports is only 5%,” the official told journalists after opening a session on ‘Utilizing Local Currency Settlement (LCS) to Increase Export-Import Efficiency of the Greater Solo Region’.
He said transactions in foreign currencies incur conversion costs, and when they are in US dollars, “the conversion fee is doubled,” suggesting that a system of bilateral payments in local currency could solve the problem.
The official said four countries have agreed to utilize LCS with Indonesia so far, namely China, Japan, Thailand and Malaysia.
Singapore has been plotted, although it has not been fully implemented, and soon the Philippines. Currently, the implementation of LCS with Saudi Arabia is also being explored,” he said.
Indonesia will be hosting the G20 international forum, bringing together 19 countries and the European Union, on November 15-16 on the island of Bali. Indonesia currently holds the presidency of the group of leading economies.