1 - 29 - 2014
Exchange rate 1000 old to 1 new
After Deletion of three zeros
No Millionaires Will be made by holding onto the old currency that will get Redenominated
A rupiah redenomination bill is currently being sought by the Indonesian government and it is asking the House of Representatives to start the legislation process for the bill next year.
The redenomination is an attempt to simplify currency transactions by replacing the currency with a new one. In the past, officials have mooted the idea of removing three zeros from the rupiah. For example, a Rp 1,000 note would become simply Rp 1.
Finance Minister Agus Martowardojo conveyed the plan to House Deputy Speaker Anis Matta on Friday, according to Ignatius Mulyono, chairman of the House’s legislation committee.
“The House accepted the government’s plans,” Ignatius said. “We are now awaiting the draft to be submitted to the House.”
Ignatius said that the House would discuss whether the redenomination bill could be included in the 2013 national legislation program — a list of bills that the House targets to ratify during a year.
An academic study of the bill, Ignatius said, has been completed. “With the redenomination, transactions would be simpler and faster,” he said.
Bank Indonesia has introduced higher-denomination bills five times since 1964 because of inflation. That makes current daily transactions often run into the millions of rupiah.
The Rp 100,000 ($10.43) note is now the second-highest denomination banknote in the region after Vietnam’s 500,000 dong note.
There are concerns, however, that the proposal could devalue the currency. But Ignatius said that the House would ensure that the government would conduct intensive socialization programs for the public should the bill be passed.
Agus said that the government and Bank Indonesia had coordinated closely to transform the redenomination idea into a workable plan.
He also added that any redenomination process would take anywhere from five to 10 years to complete.
One of the likely consequences of a redenomination is marked prevalence in the use of coins because they are worth smaller denominations.
TEMPO.CO, Jakarta - Center for Strategic and International’s economist Haryo Aswicahyono, said currency redenomination should be done after general elections where the public psychological condition is relatively stable to prevent politicalization.
"The current situation is unstable. If the people are panic because of redenomination, banks may be affected," Haryo said yesterday. According to him, most people have not understood about redenomination and often mistaken it with sanering (slashing of currency's value).
Bank Indonesia (BI)'s governor Agus Martowardojo previously said redenomination needs economic and political stability. One of the influencing factors of national economy is the fluctuating global and domestic conditions and last year's current account deficit.
According to BI's deputy of payment system, Ronald Waas, although the economy is unstable, redenomination must be done. The House of Representatives (DPR) has established a special committee and the central bank has informed the public about redenomination.
The government has planned to implement redenomination policy by removing the last three digits in rupiah. Redenomination bill has been submitted to the DPR and is expected to become law this year.
Redenomination has been said to need seven years of preparation which includes printing, designing, distribution, socialization and education. "Our country is big. Preparation and committment from all sides are needed," Ronald said.
Bank Indonesia (BI) Governor Agus Martowardojo has said a stable economy is the key to the successful implementation of the redenomination that will replace Rp 1,000 of the old currency with the new Rp 1.
“We want to make sure that the redenomination will be successful, but one of the keys is that it takes place when the country’s economy is stable and in good condition,” he said in Jakarta on Thursday, as quoted by Antara news agency.
Agus said that in 2013, domestic economic growth was corrected and the impacts of global fluctuations could still be felt in 2014.
“The US Federal Reserve’s monetary stimulus has been reduced while domestically, the inflation rate in 2013 has increased, exceeding the targets expected,” said Agus.
Moreover, he said, Indonesia’s current account was predicted to remain at a deficit of 3.5 percent until the end of 2013 and the weakening of rupiah exchange rate was still a challenge for the country’s economy this year.
“To ensure the redenomination’s targets can be achieved, it would be better that we don’t push ourselves to implement this in a less than proper situation,” said Agus.
Similarly, Deputy BI Governor Ronald Waas said one of requirements for the implementation of the redenomination was the stable economy and political situation.
“The current economic situation is less conducive to implementing the redenomination,” said Ronald, while mentioning the redenomination plan would still continue.
“The President’s directives must go on. The House of Representatives has established a special committee while public discussions have taken place,” he added.