No. 24/140/DKom
Bank Indoesia sinergized with various government ministries[1], the Financial Services Authority (OJK), Indonesia Deposit Insurance Corporation (IDIC), Indonesia Eximbank, Chamber of Commerce and Industry (KADIN Indonesia), Indonesia Employers Association (APINDO) and the Association of Appointed Cross Currency Dealers (ACCD)[2], formed the National Local Currency Settlement Task Force on 25th May 2022 aims to accelerate LCS development.
Local Currency Settlement (LCS) has been implemented since 2018 and embraced by several partner countries, namely Malaysia, Thailand, Japan and China. Their contribution has helped to maintain a positive LCS growth trend in the financial markets, reaching USD868 million in the first quarter of 2022. LCS expansion is critical to reduce domestic dependence on major global currencies, thus creating currency diversification that ultimately reinforcing rupiah exchange rate stability. Furthermore, LCS provides a natural hedge for the business community to protect against currency risk exposure, reduces transaction costs through more efficient direct rates, and facilitates faster transfers.
The program of the National LCS Task Force is as follows:
- Targeted socialization to build awareness and create understanding among industries.
- Regulatory reform to support strengthening of LCS transactions.
- Fostering breakthroughs in the form of incentives, facilitation and the acceleration of services that support LCS.
The National LCS Task Force formation based on agreement among members of the Financial System Stability Committee to develop, accelerate and expand the use of LCS, thereby supporting financial system stability and accelerating the national economic recovery. This is in accordance with Act No. 2 of 2020 concerning State Finance Policy and Financial System Stability for Covid-19 Pandemic Containment, as further elucidated in Article 26 of Government Regulation No. 23 of 2020 concerning the National Economic Recovery, stipulating that LCS is government program to support the national economic recovery.
Jakarta, 27th May 2022
Head of Communication Department
Erwin Haryono
Executive Director
Information about Bank Indonesia
Tel. 021-131, Email: bicara@bi.go.id
[1] Coordinating Ministry for Economic Affairs, Coordinating Ministry for Maritime and Investment Affairs, Ministry of State-Owned Enterprises, Ministry of Trade, Ministry of Industry and Ministry of Finance.
[2] Banks appointed by authorities in both countries to facilitate LCS by opening accounts in the respective currencies of each trading partner.
