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JAKARTA – Indonesia’s campaign to reduce reliance on the U.S. dollar in international trade has reached a new milestone, with local currency transactions (LCT) soaring to Rp400 trillion in the first four months of 2026.
The figure marks a 309 percent increase compared to the same period last year, underscoring the country’s determination to strengthen financial resilience and deepen regional integration.
Surging Transaction Volumes
According to Bank Indonesia (BI), the total value of LCT between January and April 2026 reached Rp400.19 trillion, equivalent to $22.61 billion at the current exchange rate of Rp17,700 per dollar.
This represents a sharp rise from $7.33 billion recorded during the same period in 2025.
China has emerged as Indonesia’s most significant partner in this initiative, accounting for 89 percent of the total LCT volume.
Japan contributed 6 percent, while Malaysia added 3 percent. The mechanism allows exporters and importers to settle directly in local currencies through designated banks, bypassing the dollar as an intermediary.
Strategic Rationale
BI officials emphasized that the expansion of LCT is designed to enhance efficiency: Direct settlement reduces conversion costs and accelerates trade flows.
Strengthen resilience minimizing dollar exposure shields Indonesia from global currency fluctuations.
Deepen regional ties the framework reinforces economic cooperation with key Asian partners.
Ruth A. Cussoy Intama, Director of BI’s Financial Market Deepening Department, noted that countries once hesitant are now accelerating adoption, recognizing the efficiency of local currency use.
“This growth reflects Indonesia’s determination to press dependence on the U.S. dollar,” she said.
Risks and Challenges
Despite the rapid expansion, several challenges remain Dollar dominance the U.S. dollar continues to underpin global finance and trade.
Partner concentration heavy reliance on China raises concerns about geopolitical exposure.
Market depthn broader adoption requires stronger liquidity in local currency markets to avoid volatility.
BI is actively negotiating with India and Saudi Arabia to join the LCT framework, which could diversify Indonesia’s trade partners and reduce dependence on China.
If successful, these partnerships would mark a significant step toward reshaping regional trade flows.
Continued growth in LCT as exporters and importers adapt to the system. Diversification of partners beyond China, with India and Saudi Arabia expected to join.
While the dollar’s dominance is unlikely to fade soon, Indonesia’s strategy could gradually reduce vulnerability to external shocks and foster a more balanced regional financial ecosystem.
Indonesia’s bold move reflects a broader trend among emerging economies seeking alternatives to dollar dependency.
Whether this momentum can be sustained will depend on the country’s ability to expand partnerships, deepen local currency markets, and manage geopolitical risks.
