Indonesia's Dedolarization Efforts Through LCS Gain Significant Traction

Record-Breaking Transaction Volume

Bank Indonesia's (BI) initiative to reduce dependence on the US dollar through the Local Currency Settlement (LCS) mechanism has achieved remarkable success. As of November 2025, LCS transactions have reached US$22.13 billion (approximately Rp367.22 trillion), marking a substantial increase from US$12.5 billion in the same period last year. This represents a near doubling of transaction volume, demonstrating the growing acceptance and effectiveness of the LCS framework.

Growing Participation and Expanded Partnerships

The significant growth in LCS transactions can be attributed to two main factors: an increase in participating businesses and the expansion of partner countries. BI reports that the number of LCS participants has grown to between 13,000 and 15,000 business entities, indicating broad adoption across various sectors. In 2025, BI added two new countries to the LCS framework: South Korea and the United Arab Emirates (UAE), bringing more trade transactions under the local currency settlement mechanism.

Trading Partner Dynamics

China continues to be the dominant trading partner in LCS transactions, accounting for 64% of the total transaction volume. Japan follows with a significant share of 17.8%. The strong presence of these countries in LCS transactions underscores their importance in Indonesia's international trade.

Future Expansion Plans

BI is actively pursuing further expansion of the LCS framework. Senior Deputy Governor Destry Damayanti announced that India and Singapore are set to implement LCS fully in the near future, following the signing of Memoranda of Understanding (MoUs). Additionally, BI is exploring similar cooperation with Hong Kong, given the significant trade and investment transactions between the two regions. This ongoing expansion is expected to further boost the volume and scope of LCS transactions.

The success of LCS not only supports Indonesia's dedolarization efforts but also enhances trade efficiency by allowing transactions to be settled in local currencies, reducing reliance on the US dollar and associated currency risks.