Government supports BI to redenominate rupiah

JAKARTA. The government has expressed its support of Bank Indonesia’s (BI) proposal to revive plans to redenominate the rupiah, but has yet to decide how many zeroes will be removed from the currency.

“We have not decided yet whether we will scrap three or four zeroes from the rupiah,” said Coordinating Economic Minister Darmin Nasution in Jakarta on Sunday as reported by tempo.co, adding that he preferred to eliminate three zeroes.

“If three zeroes are removed, [the resulting figure] is familiar to many people; if you eat at a restaurant and see 40.00 on the menu, that means the price is Rp 40,000 [US$3],” he explained.

Previously, BI Governor Agus Matowardojo called on the House of Representatives to immediately approve the redenomination bill into law, stressing that it was the best time to eliminate zeroes from the rupiah as Indonesia’s macroeconomic condition was currently favorable.

Darmin said the transition period for redenomination would be one to two years, while the entire process would take six to seven years to give business players enough time to make the necessary adjustments, such as changing their price tags.

“The price adjustment will also be mentioned in the law on redenomination,” he said, adding that during the transition period, new bills would be printed.

However, he stressed that such a move could only be implemented when the inflation rate was between 3 to 4 percent, as otherwise, the value of the rupiah could further weaken.