THE government, together with Bank Negara Malaysia (BNM), is intensifying efforts to strengthen and enhance existing mechanisms that facilitate trade and investment transactions in the local currency.
This initiative is part of a broader strategy aimed at bolstering the sustainability and stability of regional financial systems.
In a written response posted on the Parliament's website on Wednesday, the Finance Ministry said the growing use of local currencies in regional trade settlements highlights an increasing awareness and demand for such practices.
However, the ministry also pointed out that the choice of currency for trade settlements remains ultimately a commercial decision made by the businesses involved.
“The use of local currency for trade settlements has seen a significant increase, reflecting a growing level of awareness and demand from various parties,” Bernama reported the ministry stating.
“Nevertheless, the decision on which currency to use for settlements continues to be driven by the commercial choices of the trading companies themselves.”
The response was in relation to a question posed by Oscar Ling Chan Yew, the Member of Parliament for Sibu (PH-Sibu), who sought clarification on Malaysia’s initiatives to reduce reliance on the US dollar and the effectiveness of such efforts.
The Finance Ministry further elaborated that the government and BNM have actively encouraged the use of local currencies in cross-border trade and investment transactions as part of a long-term strategy.
One of the primary goals of these efforts is to better manage foreign exchange risk exposure, thereby strengthening the resilience of Malaysia's economy against external economic pressures.
To this end, the ministry revealed that Malaysia has engaged in discussions with strategic trade partners such as China, Thailand, and Indonesia to explore opportunities for local currency settlement. These countries were selected due to their significant bilateral trade relations with Malaysia.
“The exploration of local currency settlements with key partners like China (since 2009), Thailand (since 2016), and Indonesia (since 2017) aims to leverage the high trade volumes between these countries,” the ministry noted.
“These initiatives are expected to improve the efficiency and liquidity of local currency markets, providing direct benefits to the economies of the participating countries.”
By encouraging local currency trade and investment mechanisms, Malaysia aims to reduce its reliance on foreign currencies like the US dollar, while also enhancing regional financial integration and stability.
These efforts underscore the government's commitment to fostering a more resilient and self-sustaining regional economic environment. - February 27, 2025
