Malaysia expands use of local currencies through BRICS cooperation

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Malaysia expands use of local currencies

Highlights

Malaysia is expanding the use of local currencies through BRICS cooperation to improve the efficiency of foreign exchange exposure management and support regional markets.
An increase in transactions using regional currencies, such as those of BRICS countries, could boost market liquidity and provide businesses with more options.
Malaysia has implemented cross-border payment cooperation with China, Indonesia and Thailand to facilitate the use of local currencies and reduce companies' costs and risks.

This article was translated from the original. Read the original version by our correspondent here.

Plans to expand cross-border transactions

As reported by The Edge Malaysia, citing the Ministry of Finance, expanding the use of local currencies is seen as a way to improve the efficiency of foreign exchange exposure management and support the development of regional foreign exchange markets.

The ministry said that an increase in transactions using regional currencies, including those of BRICS member countries, could boost market liquidity and provide businesses with more options. The explanation was given to the Dewan Rakyat in response to a question from Tan Sri Abdul Hadi Awang about reforms to the international financial system that Malaysia is pursuing through BRICS.

According to the ministry, efforts to expand the use of local currencies should be market-driven, supported by efficient cross-border payment infrastructure and ongoing cooperation between countries. At the same time, the ministry acknowledged that the use of major currencies in international trade and finance is still driven by structural factors, including the size of financial markets and their widespread acceptance among businesses and investors.

Regional cooperation and impact on businesses

Malaysia has implemented several initiatives with key trading partners, including cooperation with China to facilitate the use of the renminbi and ringgit in bilateral trade.

The country has also implemented a Local Currency Transaction Framework with Indonesia and Thailand. The Ministry of Finance said 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, a move that could help companies better manage currency costs and risks.

In our previous report on China's support for Malaysia's application for full membership of BRICS, we explained how Beijing views Malaysia as an important link in regional cooperation. The article also discussed the agenda to promote the use of the yuan alongside the ringgit in trade with China and GCC partners, which could influence currency exchange arrangements and cross-border transaction flows.

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