The Association of Southeast Asian Nations (ASEAN) finance ministers and central bank governors recently addressed an important issue during their two-day meeting in Bali, Indonesia: reducing reliance on the U.S. dollar for cross-border trade and investment in the region. The pressure to move away from the U.S. dollar has increased in recent years due to the imposition of sanctions on Russia’s financial sector as a result of the conflict in Ukraine, among other factors.

To combat this problem, the ASEAN finance chiefs discussed strategies to support the use of local currency in trade settlements. One such strategy is the adoption of their Local Currency Transaction (LCT) system. This system provides ASEAN member states with a framework to settle payments in local currency, an effort to decrease reliance on western currencies.

The Indonesian president, Joko Widodo, addressed the need for this change, calling on regional administrations to use credit cards issued by local banks and to gradually stop using foreign payment systems. He argued that by doing so, Indonesia would be better protected from geopolitical disruptions in the future. The president believes that the use of local currency in payments will also stimulate the domestic economy, as it would help boost local banks and small businesses.

Indeed, ASEAN’s commitment to stabilize their economies by decreasing reliance on western currencies, in addition to promoting commerce among their member states, can also help reduce their vulnerability to external shocks. Undoubtedly, this strategy has the potential to bring about sustainable economic growth for the ASEAN region in the years to come.



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