Just on the day when Indonesia’s central bank revealed newly designed rupiah notes that will replace the ones in use since the year 2000, the bank’s Senior Deputy Governor Mirza Adityaswara noted that plans for a re-denomination of the currency, first mulled in 2014, have been revived.
On December 19, when a new set of coins and banknotes depicting national heroes and incorporating the term “Negara Kesatuan Republik Indonesia” (The Unitary State of the Republic of Indonesia), were introduced, Adityaswara said that “re-denomination must be done while the economy is stable” as it was now the case.
Indonesia, which boasts the second-highest denominated currency in Southeast Asia behind the Vietnamese dong, has been successfully reining in inflation in the recent past and kept it under 5 per cent for more than a year. The largest rupiah denomination is currently 100,000 and the smallest note is 1,000.
A re-denomination would result in banknotes ranging from one to 100 rupiah.
The central bank said the introduction of new units of currency would not reduce purchasing power nor prompt currency volatility and should have a minimal impact on prices.
Indonesian President Joko Widodo was more specific and said that he wanted parliament to consider the plan to re-denominate the currency next year, proposing a period of seven years after which the actual re-denomination could take place. That may help to avoid disruption to consumers from currency adjustments, as happened recently in India and Venezuela, he added.
Indonesian Finance Minister Mulyani Indrawati said the rupiah’s many zeroes reflected the currency’s inflation history and that she would discuss the proposal with parliament with a view to start the process next year. However, she said the proposal is not on the list of current legislative priorities for 2017.
One US dollar was worth 13,468 rupiah as of December 21 and has been hovering in a relatively stable band between 13,000 and 13,500 rupiah since mid-February. In 2000, after Indonesia had recovered somewhat from the Asian financial crisis, the rupiah stood at 7,050 against one US dollar.