Rupiah May Go on a Diet

The rupiah as we know it may be history in ten years. What, you say, how can that be. Don’t panic; no need to liquidate positions. There is no drastic devaluation coming. Just gaze wistfully at those many zeroes on bank notes and prepare to say goodbye. If a Bank Indonesia plan is adopted (and I emphasize the word if) we will all be making new, simpler calculations. You guessed it: the rupiah is being prepared for a “re-denomination”. After a 10 year phase-in period currency notes would not have the zeroes.

"Re-denomination shall be in no way detrimental to the public as it differs from previous currency reforms that reduced the exchange value of the currency. Redenomination does not affect the value of money against goods (purchase power), several zeros are simply omitted from the current denominations," clarified the new Governor of BI, Darmin Nasution.

Unlike the two other times in Indonesia’s history when the currency was redenominated to cope with high inflation this one would reflect the growing strength and stability of Indonesia’s economy and would simplify transactions. Bank Indonesia spokesmen indicated that another aim is to help in the preparation of an ASEAN Economic Community. So far local businesses and economists have had a positive reaction to the announcement even though they acknowledge there will be be costs. Several leading business leaders speculated that the change (basically shifting the decimal place) will create a more positive perception of value. However, the markets and some members of the public had an initial negative reaction. One group that will immediately cheer this move is the tourist, usually bewildered at money changing windows and the cash register.