Jakarta. Indonesia has posted over $2 billion worth of transactions under the framework of the local currency settlement, also known as the LCS, in the first four months of 2023, according to Bank Indonesia.

This is already half of what Indonesia recorded throughout last year.

The LCS enables countries to conduct bilateral transactions using their own currencies in a bid to cut dependence on the US dollar. For instance, a trade settlement between Indonesia and Japan may use rupiahs, but the rupiah settlement must take place in Indonesia. The same goes for yen if the settlement is conducted in Japan.

Bank Indonesia reported that the value of trade and investment transactions in the local currency with the said four economies had reached $2.1 billion in Jan-April 2023. The transactions mostly came from close neighbor Malaysia during that period. 

According to the Indonesian central bank, transactions using the Malaysian ringgit under the LCS facility could be worth $202.7 million a month.

"Throughout last year, the LCS transactions [with the four countries] amounted to $4.1 billion, growing by fivefold from the $797 million posted in 2020," Indra Astrayuda, a monetary policy official at Bank Indonesia, told a virtual conference on Tuesday.

"The Indonesian Rupiah [IDR] accounts for 27 percent of the transactions in the LCS framework," Indra said.

Trade Ministry data shows that Indonesia is witnessing growth in its bilateral trade with the nations with whom it has established an LCS cooperation. 

Indonesia-Malaysia trade amounted to $27.9 billion in 2022, marking a 30 percent increase from the previous year. The numbers also reached $7.9 billion in the first four months of 2023.

Bilateral trade between Indonesia and Thailand grew from $16.2 billion in 2021 to $19.2 billion in 2022. The two countries traded $5.9 billion in goods in January-April. 

Indonesia-China trade jumped from almost $110 billion in 2021 to $133.6 billion last year. Their bilateral trade throughout January-April already hit $40.9 billion.

Indonesia’s trade with Japan also witnessed a 29.2 percent growth from around $32.5 billion in 2021 to $42 billion the following year. Trade between the two nations amounted to $12.8 billion in the first four months of 2023.

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