Second, the emergence of new economic power blocs in the form of BRICS (Brazil, Russia, India, China, South Africa). BRICS is comprised of countries with a very large trading volume. So far, these nations have relied on the US dollar in settling their trade transactions. In 1982, the share of BRICS only accounted for 10.66 percent of total global output – not that significant. However, in 2022, this figure has soared to 31 percent of global GDP. With such an economic size, BRICS has moved to using the respective currencies of trading partners, or a new currency. This has posed a threat to the dominance of US dollar. With 31 percent of global output, their decision to move away from US dollars has had a crucial impact on the US, going forward.
Third, the Russia-Ukraine war has accelerated de-dollarization. Russia, as the world’s major oil and gas producer, seeks payment in Rubles, its currency, for purchase of its commodities. It also provides discounts for countries that directly buy oil and gas in Rubles. This policy has strengthened the value of the Ruble against the US dollar.
What about Indonesia?
Indonesian economic data shows a significant dependence on the US economy. In the trade sector, the US is Indonesia’s second-largest export destination, after China. In 2022, the value of Indonesia’s exports to the US reached 9.68 percent, higher than that of Japan (8.33 percent) or India (7.99 percent). This is significant, as the US holds sway over the country’s export performance and foreign exchange reserves. Meanwhile, the share of imports from the US reached 5 percent. (TABLE-1)
Indonesia’s trade with its partners is still conducted mostly in US dollars. Bank Indonesia (BI) in 2022 shows that as much as 94.85 percent of Indonesia’s exports were valued in US dollar. The use of other currencies was still limited. The use of Chinese Yuan constituted only 1.13 percent, while Japanese Yen sat at only 0.75 percent. The chart below shows that US dollar still plays an outsize role in Indonesia’s exports. (FIGURE-1)
Data on US-Indonesia trade relations provide a glimpse of Indonesia’s strong dependence on the US dollar. Apart from trade, the two countries are also bound by investments. In 2022, the US invested US$3.02 billion in Indonesia, accounting for 6.63 percent of the country’s total foreign direct investment. While the US occupied sixth place behind Singapore, China, Hong Kong, Japan and Malaysia, it is still a major player. (FIGURE-2)
Indonesia’s dependence on the US dollar is also reflected in the currency denomination of its debts. In 2022, Indonesia’s public and private debts amounted to US$396 billion, of which 68 percent was denominated in US dollars. Rupiah constituted 15 percent, while Euros and Yuan made up 6.5 percent and 5.5 percent, respectively. (FIGURE-3)