ASEAN countries are taking steps to reduce their dependence on the US dollar and promote the use of local currencies in trade settlements. The finance ministers and central bank governors of the Association of Southeast Asian Nations held a meeting in Bali, Indonesia, where they discussed ways to decrease reliance on western currencies such as the US dollar. The ASEAN group comprises Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand, and Vietnam.
One of the strategies discussed at the meeting to shift away from U.S. dollar reliance was the adoption of the Local Currency Transaction (LCT) system. This system allows for settlements in local currencies and is an extension of a previous settlement system among ASEAN member states. The ASEAN finance ministers and central bank governors released a joint statement agreeing to “reinforce financial resilience, among others, through the use of local currency to support cross-border trade and investment in the ASEAN region.”
Indonesian President Joko Widodo urged regional administrations to start using credit cards issued by local banks and to gradually stop using foreign payment systems. He cited the example of sanctions imposed on Russia’s financial sector due to the conflict in Ukraine and warned that moving away from western payment systems is necessary to protect financial transactions from “possible geopolitical repercussions.” Widodo emphasized the need for Indonesia to prepare for the possibility of facing similar sanctions in the future and stated that using local payment systems would help shield Indonesia’s economy from external shocks while supporting local banks and businesses.
The move by ASEAN countries to reduce reliance on the US dollar and western payment systems is seen as a way to promote financial resilience and support the region’s economic growth.
