KUALA LUMPUR — Malaysia as Asean chairman this year will promote the use of local currency in regional trade, not to replace major currencies but to strengthen financial resilience and regional value chains, the Finance Ministry (MOF) said.
To that end, the ministry, Bank Negara and the Securities Commission will organise several events for Asean leaders, including the Asean Finance Ministers’ and Central Bank Governors’ Meeting to be held in Kuala Lumpur in April.
“The meeting will discuss the benefits, strategies and future prospects for using local currency solutions from the macroeconomic and private sector perspectives, as well as raise this as an alternative measure for businesses and investors to use local currencies in their trade and investment transactions.
“The main objective of these measures is not to replace major currencies…but to recognise the benefits of currency diversification for trade settlement,” MOF said in a written parliamentary reply dated Feb 20.
These benefits include strengthening financial resilience to external shocks, deepening regional financial integration, reducing transaction costs, improving efficiency and strengthening regional value chains.
MOF was replying to Pang Hok Liong (Labis-PH) who asked if Malaysia as Asean chair this year would push for dedollarisation from the greenback. He also asked for the reasons why, if Malaysia was not going to promote actual dedollarisation.
In its reply, the ministry said major currencies still have a role in global trade and investment as well as financial market activities. Multinational corporations still prefer transacting in major currencies, which are also used in commodity pricing, the ministry added.
However, Malaysia and Thailand have implemented a local currency settlement framework since 2016, and a similar arrangement was launched with Indonesia in 2017.
“These arrangements will be further expanded with other Asean members which are ready…to increase business and investor access to the Malaysian ringgit, Thai baht and Indonesian rupiah, as well as to enable businesses and investors to make and receive payments in the respective currencies,” MOF said.
Asean had also adopted the Declaration on Advancing Regional Payment Connectivity and Promoting Local Currency Transaction in May 2023 to promote the use of local currencies in economic and financial transactions between member countries.
“This is an early step to reducing dependency on the US dollar and to improve stability of regional currencies,” the ministry added.
Since coming to office in 2022, Prime Minister Datuk Seri Anwar Ibrahim, who is also Finance Minister, has advocated dedollarisation in the form of wider use of local regional currencies for trade and investments.
In Parliament last November, Anwar said he has held talks with China and Asean leaders on using more local currency for trade, to increase demand for the ringgit.
Acknowledging that most global trade was still done in US dollars, Anwar said some private companies in Malaysia had at least begun using up to 70% of local currency in their transactions.
Most government-linked companies have also begun conducting transactions in ringgit, he said then. – February 21, 2025