Rising momentum in non-dollar trade settlements
The Indonesian government is intensifying efforts to expand Local Currency Transactions (LCT), as volumes surge and the shift away from the US dollar gains traction among key trading partners. By promoting settlements in local currencies, authorities aim to improve efficiency, reduce dollar dependency, and strengthen economic resilience.
The push comes amid renewed pressure on the rupiah, driven by global geopolitical tensions and financial market volatility, underscoring the urgency of Indonesia’s broader de-dollarization strategy.
Ferry Irawan, Deputy for Business Management and Development Coordination at the Coordinating Ministry for Economic Affairs, said LCT transactions have shown strong and consistent growth in value, participation, and market adoption.
Between January and February 2026, transaction values reached approximately US$8.45 billion (around Rp144 trillion), up sharply from US$3.21 billion (Rp54.9 trillion) in the same period last year, equivalent to roughly 163% year-on-year growth.
“Bank Indonesia and the Government of Indonesia have jointly advanced the LCT framework to diversify bilateral payment systems, improve market efficiency, deepen financial markets, and ultimately reduce exchange rate volatility while strengthening economic resilience,” Ferry said in a statement, as cited by SindoNews on April 12, 2026.
Trade surplus and expanding sectoral adoption
Indonesia’s external trade performance continues to reinforce this momentum. In February 2026, the country recorded a trade surplus of US$1.27 billion (Rp21.7 trillion), supported largely by exports of non-oil and gas commodities such as coal, palm oil, and iron and steel.
This trade structure provides a strong foundation for the expansion of LCT. Sustained export flows, combined with deep trade linkages with key partners in Asia and the Middle East, create favorable conditions for broader adoption of local currency settlements.
Indonesia’s trade integration with economies such as Malaysia, Thailand, Japan, China, South Korea, and the United Arab Emirates, all of which participate in LCT arrangements, naturally supports a gradual shift away from dollar-based bilateral transactions.
Meanwhile, state-owned enterprises (SOEs) account for between 10% and 19% of total LCT transactions. While this indicates growing adoption, it also underscores significant untapped potential, particularly within the private sector, which is expected to drive the next phase of expansion.
Since its introduction in 2018, the LCT framework has expanded across key sectors, including manufacturing, electricity, gas, transportation, trade, and services, highlighting its increasing role as a practical instrument supporting real-sector activity while helping stabilize the rupiah.
By 2025, Indonesia had established LCT arrangements with six major partner countries: Malaysia, Thailand, Japan, China, South Korea, and the United Arab Emirates; marking tangible progress in regional financial integration and cross-border local currency usage.
Ferry also highlighted a sharp increase in participation, with 14,621 users recorded in February 2026 and a monthly average of 16,030 users, significantly higher than the 2025 average of 9,720.
Strengthening policy support and strategic coordination
At its core, LCT enables cross-border transactions to be settled directly in local currencies, reducing reliance on dominant global currencies such as the US dollar. The system is supported by three key pillars: flexible foreign exchange regulations, strengthened monitoring and supervision, and the role of Appointed Cross Currency Dealers (ACCD).
To accelerate adoption, the government has established a National LCT Task Force comprising ten ministries and agencies. The task force is mandated to enhance coordination, formulate supporting policies, and drive broader utilization of LCT, particularly in export-import activities.
In parallel, the government is preparing a range of incentives, facilities, and simplified business processes aimed at reducing transaction costs and improving efficiency for businesses engaging in international trade through LCT schemes.
“Developing LCT is a concrete and strategic step toward enhancing efficiency, reducing external vulnerabilities, and strengthening multilateral financial cooperation. Through sustained collaboration between the government, financial institutions, and businesses, we can build a more resilient, integrated, and sustainable economic ecosystem,” Ferry added.
Central bank backing reinforces policy direction
Support for the initiative is echoed by Filianingsih Hendarta, Deputy Governor of Bank Indonesia, who emphasized that the continued expansion of LCT reflects its strategic role in strengthening Indonesia’s economic resilience.
She noted that rising participation and transaction volumes signal growing confidence among market players, pointing to a positive trajectory for the policy’s long-term effectiveness.
Institutionally, Bank Indonesia has positioned LCT as a key instrument to enhance market efficiency, deepen financial integration, and maintain rupiah stability. This aligns with broader efforts to expand cross-border digital payment connectivity, including the regional rollout of QRIS (Quick Response Code Indonesian Standard) as part of LCT-linked infrastructure.
Under Bank Indonesia’s “17-8-45” target for 2026: 17 billion transactions, 8 partner countries, and 45 million merchants; QRIS is expected to play an increasingly important role in facilitating seamless local currency transactions across borders, particularly within ASEAN.
Together, these initiatives reinforce Indonesia’s strategy to navigate global financial uncertainty while advancing regional monetary cooperation and reducing reliance on external currencies.
