Indonesia has significantly intensified its strategic shift away from the United States dollar, marking a historic milestone in its de-dollarization journey as Local Currency Transactions (LCT) surged to USD 25.6 billion by the end of 2025. This figure represents a remarkable 100 percent increase compared to the previous year, signaling a robust transition in how Southeast Asia’s largest economy conducts international trade and financial settlements. The total transaction value, equivalent to approximately Rp434.8 trillion based on an exchange rate of Rp16,984 per USD, underscores the growing confidence of market participants in utilizing the Indonesian Rupiah and the currencies of key partner nations for cross-border activities.
The Coordinating Minister for Economic Affairs, Airlangga Hartarto, emphasized that this achievement serves as a foundational pillar for national economic stability heading into 2026. By reducing the systemic dependence on the US dollar, Indonesia is positioning itself to better withstand global monetary shocks and exchange rate volatility. The adoption of LCT is no longer merely a policy experiment but has evolved into a mainstream financial practice that provides tangible value-added benefits to the international trade sector, particularly in terms of efficiency and cost reduction for exporters and importers.
The Evolution of Local Currency Transactions in Indonesia
The journey toward de-dollarization in Indonesia has been a multi-year effort spearheaded by Bank Indonesia in collaboration with the central banks of neighboring countries and major trading partners. The LCT framework, formerly known as Local Currency Settlement (LCS), was designed to facilitate the use of local currencies for bilateral trade and direct investment. This mechanism allows businesses to settle transactions without having to convert their funds into US dollars first, thereby eliminating the double conversion costs and the risks associated with the fluctuation of the greenback.
In 2025, the scope of these transactions expanded significantly. According to Minister Airlangga, the primary drivers of this growth were Indonesia’s key trading partners, including Malaysia, Thailand, Japan, South Korea, and China. These nations have not only integrated their banking systems to support LCT but have also embraced digital payment innovations. One of the most visible successes in this initiative has been the implementation of the Quick Response Code Indonesian Standard (QRIS) for cross-border payments, which allows Indonesian travelers and businesses to make payments in their own currency while abroad, and vice versa.
The rapid adoption in 2025 was facilitated by the National Task Force for Local Currency Transactions, a body established to harmonize regulations and promote the use of the Rupiah in international forums. This task force includes representatives from the Ministry of Finance, the Ministry of Foreign Affairs, and the Financial Services Authority (OJK), ensuring a synchronized approach across all levels of government and the financial industry.
A Chronology of Strategic Milestones
The path to the USD 25.6 billion milestone in 2025 was paved by a series of strategic agreements and technological deployments over the preceding decade.
- 2018–2020: The Foundation Phase. Indonesia initiated LCS agreements with Thailand and Malaysia, focusing primarily on trade settlements. These early stages were characterized by limited volume but served as a proof of concept for the feasibility of non-dollar settlements in the ASEAN region.
- 2021: Expansion to Major Economies. A significant turning point occurred when Japan joined the framework. As one of Indonesia’s largest investors and trade partners, the inclusion of the Japanese Yen provided the liquidity and scale necessary to move the needle on de-dollarization.
- 2022–2023: The Digital Integration. During its G20 Presidency and ASEAN Chairmanship, Indonesia pushed for the Regional Payment Connectivity (RPC) initiative. This period saw the launch of cross-border QRIS with Thailand and Malaysia, followed by pilot projects with Singapore.
- 2024: Mainstreaming and China’s Integration. The full integration of the Chinese Yuan (CNY) into the LCT framework significantly boosted transaction volumes, given that China is Indonesia’s largest trading partner. By the end of 2024, transactions had reached roughly USD 12.8 billion.
- 2025: The Leap to USD 25.6 Billion. The doubling of the transaction value in 2025 was driven by increased participation from the private sector, specifically the manufacturing and mining industries, which began settling long-term contracts in local currencies.
Supporting Data and Economic Performance
The surge to USD 25.6 billion in LCT volume reflects a broader trend of diversification in Indonesia’s foreign exchange reserves and trade settlement methods. Data from the Coordinating Ministry for Economic Affairs indicates that the number of "Appointed Cross Currency Dealers" (ACCD)—banks authorized to facilitate these transactions—grew by 30 percent in 2025. This expansion in the banking network ensured that even small and medium-sized enterprises (SMEs) could access the benefits of LCT.
In terms of regional breakdown, transactions with China and Japan accounted for the largest share of the USD 25.6 billion total, driven by industrial imports and infrastructure financing. Meanwhile, transactions with ASEAN partners like Thailand and Malaysia saw the highest growth in the retail and tourism sectors, largely fueled by the seamless integration of QRIS.
Furthermore, the stability of the Rupiah throughout 2025 was partly attributed to the reduced demand for US dollars for trade settlements. By settling USD 25.6 billion in local currencies, the Indonesian economy effectively reduced its "dollar-hunger," allowing Bank Indonesia to maintain more robust foreign exchange reserves to defend the currency against speculative attacks.
Official Responses and Policy Directions
The government’s optimism regarding the future of LCT is echoed by various high-ranking officials. Ferry Irawan, the Deputy for Coordination of State-Owned Enterprises, Research, and Innovation at the Coordinating Ministry for Economic Affairs, noted that the trend observed in early 2026 remains highly positive. He highlighted that LCT has shown a consistent upward trajectory not only in value but also in market participation and adoption rates.
"The consistency we see in the first quarter of 2026 suggests that the market has moved beyond the ‘trial’ phase. Businesses now view LCT as a more efficient and stable way to conduct international business," Irawan stated. He added that the government is now looking to expand the framework to include more complex financial instruments beyond trade and direct investment, such as government bonds and interbank lending.
The Ministry of Finance has also signaled its support by providing fiscal incentives for companies that actively use LCT for their export-import activities. These incentives are designed to offset any initial administrative costs associated with switching from dollar-based accounting to multi-currency frameworks.
Analysis of Implications for the National Economy
The shift toward de-dollarization carries profound implications for Indonesia’s long-term economic resilience. First and foremost is the mitigation of "imported inflation." When the US dollar strengthens globally, countries dependent on the dollar for trade often see the prices of imported goods rise, leading to domestic inflation. By using local currencies, Indonesia can bypass the volatility of the dollar-Rupiah exchange rate for a significant portion of its imports.
Secondly, the LCT framework strengthens regional economic integration. As ASEAN members and major Asian economies move toward a unified local currency settlement system, the region becomes less susceptible to the monetary policy shifts of the US Federal Reserve. This "de-coupling" allows Asian central banks to tailor their interest rate policies more closely to domestic needs rather than being forced to follow the Fed to prevent capital flight.
However, challenges remain. For LCT to reach its full potential, there must be sufficient liquidity in the local currency markets of partner countries. For instance, an Indonesian exporter holding South Korean Won needs a deep and liquid market to utilize or convert those funds without significant slippage. Analysts suggest that the next phase of Indonesia’s de-dollarization will require deeper integration of financial markets, including the development of hedging instruments in local currencies.
Future Outlook: Beyond 2026
As Indonesia moves further into 2026, the government aims to expand the LCT framework to include more countries in the Middle East and Europe. There are ongoing discussions about establishing similar settlement mechanisms with the United Arab Emirates and Saudi Arabia, which would be particularly impactful for energy imports and the financing of religious tourism (Hajj and Umrah).
The success of the 2025 milestone has also positioned Indonesia as a leader in the global de-dollarization movement among emerging markets. By demonstrating that a large, developing economy can successfully halve its reliance on the dollar for bilateral trade within a few years, Indonesia provides a blueprint for other nations seeking to safeguard their economic sovereignty.
The ultimate goal, as envisioned by the National Task Force, is a diversified global monetary system where the Rupiah plays a central role in regional trade. With the momentum gained from the USD 25.6 billion achievement, Indonesia is well on its way to transforming its financial landscape, ensuring that its economic future is determined by domestic productivity and regional cooperation rather than the fluctuations of a single foreign currency.
