The economic bloc of developing nations has been working on establishing a new reserve currency
© Getty Images / Viktoryia Vinnikava / EyeEm
Indonesia is following the lead of the BRICS group in its policy of shifting away from the US dollar in trade and financial transactions, according to the country’s central bank.
Jakarta has introduced transactions in the local currency to settle cross-border trades, the portal SINDOnews has reported, citing Bank of Indonesia Governor Perry Warjiyo.
“Indonesia has initiated diversification of the use of currency in the form of LCT [local currency trading]. The direction is the same as the BRICS. In fact, Indonesia is more concrete,” Warjiyo said on Friday, addressing a press conference with the board of governors meeting.
Indonesia has already implemented the practice with a number of countries, such as Thailand, Malaysia, China, and Japan, he added. It also plans to sign a cooperation agreement with South Korea regarding local currency trading in early May.
Warjiyo’s statement comes as the BRICS economic bloc – comprising Brazil, Russia, India, China, and South Africa – claims to be working on establishing a joint payment network to cut reliance on the Western financial system, and on the dollar in particular. The member countries have been increasing the use of local currencies in mutual trade and also working on establishing a new reserve currency.
Last month, Brazil and China signed an agreement to trade in their own currencies, thus abandoning the greenback as an intermediary.
China’s attempts to ditch the dollar in international trade have intensified against the backdrop of the sweeping sanctions introduced by Western nations against Russia, a major global energy producer and exporter. Indian policymakers have also taken several steps towards shifting away from the greenback to rubles and rupees in mutual trade with Moscow.
Russia began de-dollarizing its economy in 2014, when the West introduced the first round of sanctions against the country over Crimea. Moscow has been boosting the use of alternative currencies in transactions since last year, with President Vladimir Putin suggesting earlier that the Chinese yuan should be used more widely, not only in trade with China, but also in Russia’s transactions with countries in Africa and Latin America. The latest data from the Bank of Russia shows that the yuan has become a major player in Russia’s foreign trade.
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