The Plan to Redenominate Indonesian Currency and Its Progress: A Brief Overview

Update on Rupiah Redenomination Policy, Still on Going?

Recently, news about the plan to remove zeros from the Indonesian rupiah currency or to redenominate it has resurfaced on social media platforms. However, this is not a new idea, as the government and Bank Indonesia (BI) had been discussing it since 2013. The details of this plan were included in the draft of the Redenomination of Currency Bill.

Despite the drafting of the bill in 2013, it was delayed due to global economic turmoil and the normalization of monetary policies in the United States. But in 2017, Finance Minister Sri Mulyani Indrawati and Bank Indonesia Governor Agus Martowardojo, who held the position from 2013-2018, met with President Joko Widodo to report that the Redenomination of Currency Bill was ready to be proposed to the parliament.

At that time, the government and BI believed it was an opportune moment to propose the bill as the Indonesian economy and politics were stable, with economic growth above 5%, controlled inflation at around 3%, and strong foreign reserves.

However, Sri Mulyani chose to prioritize the proposed revision of the General Taxation Provisions and Procedures Bill (KUP) to be proposed to the parliament as a National Legislation Program (Prolegnas), and the Redenomination of Currency Bill was not proposed.

Years passed without any news until June 29, 2020, when the Ministry of Finance proposed that the Redenomination of Currency Bill be included in the Medium-Term National Legislation Program (Prolegnas) for 2020-2024. This proposal was stated in the Ministry of Finance Regulation No. 77 of 2020 on the Strategic Plan of the Ministry of Finance for 2020-2024.

According to the regulation, the urgency of the Redenomination of Currency Bill is for the efficiency of the economy, simplification of transaction systems, accounting, and the reporting of the state budget. Typically, redenomination is done when the economy is stable and heading towards a healthier state. Sanering, on the other hand, involves cutting the value of the currency when the economy is unhealthy.

Redenomination is usually carried out when inflation is low and stable, economic stability is maintained, and there is a guarantee of price stability, as well as when there is a need and readiness among the public.

However, Bank Indonesia’s Head of Money Management Department, Marlison Hakim, stated that the redenomination is under the government’s jurisdiction, with BI only following instructions.

Marlison has not heard about any further discussions regarding the matter to redenominate the rupiah, but BI is always ready to assist if the government requests it.