Indonesia Ditches Dollar as Local Currency Transactions Surge 309 Percent

Makassar, IDN Times – Bank Indonesia (BI) is intensifying its push for Local Currency Transactions (LCT) as a strategic response to global economic uncertainty and shifting international dynamics. According to Ruth A. Cussoy Intama, Director of the Financial Market Deepening Department at Bank Indonesia, adopting local currency schemes is essential for reducing reliance on the US dollar while significantly boosting trade efficiency between partner nations.

The adoption of LCT has seen a remarkable surge. Data from BI through April 2026 reveals that the average monthly number of LCT participants reached 5,265, a substantial increase from just 497 in 2021 and 1,741 in 2022. This upward trend accelerated to 2,602 participants in 2023 and 5,020 in 2024, with monthly averages briefly peaking at 9,720 in early 2025.

“We believe Local Currency Transactions are a vital initiative that must continue to evolve, especially following the policies implemented by the US President. It is time to strengthen bilateral cooperation through LCT frameworks,” Ruth stated during a media training session in Makassar on Friday, May 21, 2026.

1. LCT transaction value hits 22.61 billion US dollars between January and April

Ruth noted that several nations are actively accelerating bilateral cooperation by using local currencies for trade and investment via Appointed Cross Currency Dealer (ACCD) banks. Indonesia is recognized as one of the most proactive countries in driving LCT implementation, gaining significant traction among its trading partners.

The growth in participation is mirrored by a sharp increase in transaction volume. By April 2026, the value of LCT transactions reached 22.61 billion US dollars, representing a 309 percent year-on-year increase compared to the 7.33 billion US dollars recorded during the same period in the previous year.

This expansion reflects a broader effort to diversify currency use in international finance. By minimizing exposure to US dollar volatility, countries can better protect their trade and financial flows from global economic shocks. “This is not about avoiding the US dollar, as we recognize its continued dominance in global trade. However, for countries with significant bilateral trade volumes, there is no logical reason to use a third-party currency,” Ruth explained.

2. China leads in LCT volume

Currently, Indonesia’s primary partners for LCT implementation are China, Japan, and Malaysia. China remains the largest contributor, accounting for 89 percent of total LCT volume, followed by Japan at 6 percent and Malaysia at 3 percent.

The central bank emphasizes that the LCT scheme improves cost efficiency by eliminating the need for the US dollar as an intermediary currency. Furthermore, LCT facilitates diversified currency exposure, deepens regional financial markets, and expands access for market participants across the region.

3. Expansion to Singapore, India, and Saudi Arabia

Indonesia’s journey with LCT began in 2018 with Malaysia and Thailand, before expanding to include Japan, China, and South Korea. Looking ahead, the central bank is finalizing operational guidelines to integrate Singapore and India into the framework.

“The progress of Bank Indonesia’s LCT program started with Malaysia and Thailand, then moved to Japan, China, and Korea. In the near future, we will see implementation commence with Singapore, India, and Saudi Arabia,” Ruth concluded.

Indonesia’s Balance of Payments recorded a deficit of 160.16 trillion Rupiah in the first quarter, with the current account deficit deepening in Q1 2026.