Initiatives in place to reduce dependency on USD, says Finance Ministry

KUALA LUMPUR: Several initiatives have been explored to encourage wider use of regional currencies to reduce the country's dependence on the USD, says Prime Minister Datuk Seri Anwar Ibrahim.

Anwar, who is also the Finance Minister, said that the initiative included the implementation of the Local Currency Settlement Framework (LCSF).

"So far, Malaysia has LCSF arrangements with Indonesia and Thailand.

"In addition, Malaysia was also one of the first countries to sign a currency arrangement agreement with the People's Bank of China (PBC) in 2009.

"This agreement further facilitates the use of the renminbi and ringgit currencies for trade and investment payment purposes between China and Malaysia," he said in a written response to Datuk Seri Dr Wee Ka Siong (BN-Ayer Itam) on Thursday (May 25).

Dr Wee had earlier asked the government's stance on the use of the USD as an international trade currency and whether there are any proposed alternatives to replace reliance on USD in global trade involving Malaysia.

Anwar also said that the usage of currency other than USD would be subject to demand by businesses.

"For example, most businesses prefer to use financial instruments and transact in currencies that have large and open financial markets.

"This will help ensure quick access to liquidity, especially in times of emergency.

"Therefore, in order to minimise liquidity and credit risk, investors, banks and businesses prefer to use financial instruments denominated in USD, which has the largest bond market and the highest liquidity in the world," he added.