Update on Rupiah Redenomination Policy, Still on Going?

Update on Rupiah Redenomination Policy, Still on Going?

The Central Bank and several other monetary supporters have initiated the redenomination of the Rupiah for a long time. Simplifying the rupiah’s value is considered necessary in facing a new chapter of today’s finances. Too many digits are considered inefficient in the financial system. Then, how is the continuation of this idea?

Unfortunately, the Rupiah Redenomination Bill (RUU) has not been continued until now. However, recently this discourse has become a hot topic of discussion in the community.

The Rupiah Redenomination Bill has been included in the medium term by the Minister of Finance Sri Mulyani Indrawati and is stipulated in the Minister of Finance Regulation (PMK) Number 77/PMK.01/2020 concerning the Strategic Plan of the Ministry of Finance for 2020-2024.

At that time, Sri Mulyani explained, there were at least two reasons why simplification of currency values ​​had to be done.

First, to create efficiencies in the form of accelerating transaction times, reducing the risk of human error, and efficient pricing of goods/services due to the simple number of rupiah digits.

Second, to simplify the transaction system, accounting, and reporting of the State Budget because there are not many or reduced numbers of rupiah digits.

However, at that time, Sri Mulyani emphasized that the government and related authorities would focus first on handling and preventing the transmission of the coronavirus or Covid-19.

“So now we are Covid-19 first. It’s a medium-term [redenomination],” Sri Mulyani said in September last year, quoted Tuesday (23/8/2022).

BI views that the success of redenomination is largely determined by various things that are currently being studied as has been done by several countries that have succeeded in doing so.

The redenomination is usually carried out when inflation expectations are in the low range and the movement is stable, economic stability is maintained and there are guarantees for price stability as well as the needs and readiness of the community.

Unfortunately, the current economic situation is not yet fully stable. After the Covid-19 pandemic, various new problems are threatening the domestic economy.

For information, redenomination is a simplification and equalization of the value of the Rupiah.

In a Bank Indonesia study, it is explained that redenomination is not decontamination or cutting off people’s purchasing power through cutting the value of money.

Redenomination is usually carried out in stable economic conditions and towards a healthier direction. Meanwhile, decontamination is the cutting of money in an unhealthy economy, where only the value of the money is cut.

In redenomination, both the value of money and goods, only a few zeros are removed. Thus, redenomination will simplify the writing of the value of goods and services followed by simplifying the writing of payment instruments (money).

Furthermore, it will simplify the accounting system in the payment system without harming the economy.