Finance ministers and central bank governors from the Association of Southeast Asian Nations (ASEAN) are seeking ways to reduce their countries’ reliance on the U.S. dollar and encourage the use of local currencies in trade settlements. Indonesian President Joko Widodo said, “We must not forget the sanctions imposed by the United States on Russia.”
ASEAN countries are seeking to reduce their dependence on the U.S. dollar
A meeting of finance ministers and central bank governors of the Association of Southeast Asian Nations (ASEAN) was held in Bali, Indonesia, on March 30 and 31. Among the topics discussed was reducing dependence on Western currencies such as the U.S. dollar; ASEAN consists of Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand, and Vietnam.
Also present were representatives from the Asian Development Bank (ADB), the ASEAN+3 Macroeconomic Research Office (AMRO), the International Monetary Fund (IMF), the Financial Supervisory Service (FSB), the Bank for International Settlements (BIS), and six international organizations
of the World Bank.
At the end of the two-day meeting, ASEAN finance ministers and central bank governors issued a joint statement, saying that they “agreed to strengthen financial resilience through the use of local currencies and other measures to support cross-border trade and investment in the ASEAN region.”
One of the strategies discussed by ASEAN finance chiefs to move away from dependence on the US dollar was the adoption of a Local Currency Transaction (LCT) system. This system is an extension of the settlement system previously in place among ASEAN member countries, which allows payments to be made in local currencies.
Indonesia’s president warns of the “geopolitical consequences” of relying on Western payment systems
Indonesian President Joko Widodo recently urged local administrations to start using credit cards issued by local banks and gradually stop using foreign payment systems. He explained that this change is necessary to protect Indonesia from geopolitical turmoil, citing as an example the sanctions imposed on the Russian financial sector by the Ukrainian conflict.
Moving away from the Western payment system is necessary to “protect financial transactions from geopolitical consequences,” Widodo explained, adding:
Be very careful. We must not forget the sanctions that the U.S. is imposing on Russia.
The Indonesian president warned that the sanctions imposed on Russia have exposed the vulnerabilities of countries that depend on foreign payment systems. And he stressed the need to prepare for the possibility that Indonesia could face similar sanctions in the future. The President said that using local payment systems would help protect the Indonesian economy from external shocks, while at the same time supporting the domestic economy by promoting local banks and businesses.
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