LCT Implementation Realises Indonesia's Financial Sovereignty Amid Global Pressures
Bank Indonesia (BI) initiated the Local Currency Transaction (LCT), formerly known as Local Currency Settlement (LCS), around eight years ago as an effort to reduce dependence on the US dollar. LCT implementation has continued to grow, increasing more than 70-fold over the past eight years, illustrating the realisation of financial sovereignty amid global uncertainty.
Data compiled by Republika shows that the value of LCT transactions at its launch in 2018 was recorded at USD 348 million. It then jumped more than 100 per cent to USD 760 million in 2019. The figure continued to grow from year to year, until in 2025 it reached USD 25.66 billion, or 74 times the value at its initial launch.
In fact, during the first five months of 2026, the figure already exceeded the total transaction value for all of 2025. BI recorded that LCT transactions from January to May 2026 reached USD 32.89 billion, or approximately Rp 592 trillion at an exchange rate of Rp 18,000 per US dollar.
The increase in LCT transaction value is in line with BI’s efforts to expand cooperation with various countries. In 2018, LCT implementation began through cooperation with Malaysia and Thailand. Then in 2019, LCT implementation cooperation was carried out with Japan, followed by China in 2021. In 2024, two more countries joined, namely South Korea and the United Arab Emirates. As a result, the number of active partner countries implementing LCT now stands at six. BI is currently expanding LCT to several other countries, such as Singapore, India, and Saudi Arabia.
These data show that LCT is increasingly accepted by businesses as an alternative for settling international transactions without relying on the US dollar. Business players acknowledge its benefits, especially amid global dynamics full of uncertainty.
One of them is Indonesian businessman Moelyono Soesilo, CEO of PT Sumber Kurnia Alam, a supplier and exporter of agricultural commodities focusing on coffee. Moelyono said his company has been using LCT since last year and has recorded increased utilisation of LCT over the past year.
According to him, the presence of LCT provides a transaction alternative that greatly helps simplify the payment system process without having to exchange into US dollars first. It is sufficient to use the currencies of the two countries involved in export-import activities. This is considered more effective while reducing costs, amid highly volatile financial market conditions due to geopolitical and geoeconomic uncertainty.
“We know that the US dollar is currently fluctuating, so if we use other currencies, it can be more stable, not experiencing extreme ups and downs like now,” Moelyono said when contacted by Republika on Friday (31/7/2026).
He further explained that with LCT, exporters like him can diversify currencies. This makes it more capable of reducing the risk from the turbulent movement of the US dollar. LCT itself can also be done without hedging because it uses direct spot market transactions, so businesses can manage risk better.
“The US dollar movement could go to Rp 18,100 or Rp 18,200. Without LCT, we would have to manage that risk, which sometimes causes us difficulties. With LCT, we are helped in managing our risk,” he explained.
According to his calculations, the benefits of using LCT can create a difference of around 1–2 per cent compared with using the US dollar. Although it seems small, he acknowledged that it helps smooth the company’s cash flow.
“It can have an impact of around 1–2 per cent, which makes our cash flow turnover faster,” he said.