ASEAN Nations Shift Away from US Dollar in Trade Settlements
ASEAN Countries Look to Promote Use of Local Currencies in Trade Settlements
The finance ministers and central bank governors of the Association of Southeast Asian Nations (ASEAN) met on March 30-31 in Bali, Indonesia, to discuss ways to reduce dependence on western currencies, such as the U.S. dollar, and to promote the use of local currencies in cross-border trade and investment. ASEAN is composed of Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand, and Vietnam.
During the two-day meeting, the ASEAN finance ministers and central bank governors issued a joint statement agreeing to “reinforce financial resilience, among others, through the use of local currency to support cross-border trade and investment in the ASEAN region.” They also explored strategies to reduce reliance on the U.S. dollar, including the adoption of their Local Currency Transaction (LCT) system, an extension of a previous settlement system among ASEAN member states that allows for settlements in local currencies.
Indonesian President Joko Widodo highlighted the importance of moving away from western payment systems, citing the example of sanctions imposed on Russia’s financial sector due to the conflict in Ukraine. He urged regional administrations to use credit cards issued by local banks and gradually stop using foreign payment systems, emphasizing that this change is necessary to protect Indonesia from geopolitical disruptions.
Widodo explained that relying on foreign payment systems exposes countries to vulnerabilities and the risk of possible geopolitical repercussions. He emphasized the need for ASEAN countries to prepare for the possibility of facing similar sanctions in the future by using local payment systems that would help shield their economies from external shocks while also promoting local banks and businesses. The meeting was also attended by representatives from six international organizations, namely the Asian Development Bank (ADB), ASEAN+3 Macroeconomic Research Office (AMRO), the International Monetary Fund (IMF), the Financial Supervisory Board (FSB), the Bank for International Settlement (BIS), and the World Bank, highlighting the importance of ASEAN’s efforts to promote regional financial resilience.