KUALA LUMPUR – Promoting local currency settlements for cross-border trade and investment is among the key efforts taken by the government to reduce reliance on the US dollar.
The Finance Ministry, in a parliamentary response yesterday, said the government and Bank Negara Malaysia (BNM) have been actively working on strengthening local currency use, particularly through settlement agreements with key trading partners.
Malaysia has established such agreements with China since 2009, Thailand since 2016, and Indonesia since 2017, facilitating smoother trade transactions while reducing exposure to foreign exchange risks.
“These initiatives enhance market liquidity and efficiency while bringing mutual economic benefits to regional economies,” said the ministry in response to a question by Oscar Ling (Sibu-PH).
Malaysia is also driving financial cooperation at the Asean level. In August 2023, Asean finance ministers and central bank governors approved the High-Level Principles on the Aseab LCT Framework, which provides guidelines for member countries seeking to establish local currency transaction partnerships.
“The increasing use of local currencies in regional trade reflects the growing awareness and demand”, the ministry added, emphasising that the government and BNM will continue refining existing mechanisms to facilitate trade and investment in local currencies, reinforcing regional financial stability.
However, the ministry emphasised that businesses remain free to choose their preferred currency for trade settlements, as commercial decisions ultimately determine transaction preferences. – February 27, 2025