KUALA LUMPUR: Malaysia will continue strengthening financial cooperation with BRICS countries to promote the use of local currencies in cross-border trade and investment, says Prime Minister Datuk Seri Anwar Ibrahim.
Anwar, who is also Finance Minister, said greater reliance on local currencies could help developing economies reduce transaction costs, minimise foreign exchange risks and strengthen their resilience against external financial shocks.
He said promoting local currency transactions was among the key areas of financial cooperation under BRICS, particularly in efforts to improve the efficiency of international trade and investment.
"The benefits for developing countries are primarily aimed at improving transaction efficiency and strengthening financial resilience against external shocks, in line with efforts to gradually expand the use of local currencies," he said in a written parliamentary reply on Tuesday (Nov 3).
Tan Sri Abdul Hadi Awang (PN-Marang) had asked about Malaysia's efforts to pursue international financial reforms through BRICS to ease the debt burden on developing countries, which has affected their governments' ability to provide basic necessities.
He said wider adoption of local currencies would also enable businesses to manage foreign exchange exposure more effectively.
"Increased transactions involving regional currencies, including those of BRICS member countries, could improve liquidity and support the development of regional foreign exchange markets.
"This would provide businesses with more options when conducting international transactions," he said.
However, Anwar acknowledged that major international currencies would continue to dominate global trade and finance due to structural factors, including the size of their financial markets and widespread acceptance among businesses and investors.
He said efforts to encourage local currency transactions must therefore be driven by market demand, supported by efficient cross-border payment infrastructure and sustained cooperation between countries.
Malaysia had already introduced several initiatives with major trading partners to facilitate transactions in local currencies, he added.
"These include cooperation with China to encourage the use of the ringgit and renminbi in bilateral trade, as well as the Local Currency Transaction Framework (LCTF) established with Indonesia and Thailand.
"Malaysia will continue to strengthen and improve existing channels and mechanisms to facilitate and expand the use of local currencies in cross-border trade and investment," he said.
Anwar said these efforts would ultimately contribute towards a more diversified and resilient international financial system.
