To ease concern, Bank Indonesia Governor Darmin Nasution immediately called for a press conference early Tuesday, saying that the planned redenomination of the national currency would not inflict any financial losses as the measure would only strike a few zeros from the current denominations.

Darmin said the redenomination was different from the currency policy employed by the government in the early 1960s, which involved reducing the exchange value of the currency.

“We haven’t yet decided how many zeros will be removed. However, we are sure that it will not cause any loss to the currency’s value,” Darmin Nasution told a press conference on Tuesday.  

“The central bank is considering the rupiah redenomination because its exchange rate is too low against other currencies,” he said.

Darmin, who was last week elected by the House of Representatives as BI governor but has not yet been inaugurated, said the redenomination was part of the government’s efforts to comply with regional economic reform to coincide with the establishment of the ASEAN Economic Community (AEC) in 2015.

“It would be better if our currency has an equal value with other currencies in the region,” he said, while mentioning Turkey as an example of a country that has successfully redenominated its currency as part of its preparation to join the EU.

At present, the rupiah is the third-lowest-priced currency in term of its exchange rate to the US dollar, after the Mozambican metical (23,100/US$1) and the Vietnamese dong (16,000).

Darmin said the redenomination of the rupiah would be carried out in four stages over 10 years to minimize public confusion.

The four stages would be an information campaign to alert the public between 2011 and 2012, a transition period between 2013 and 2015, the gradual withdrawal of the “old” rupiah in 2016-2018, and the use of the “new” rupiah between 2019 and 2020.

During the transition period, the central bank will circulate both old and new rupiah bank notes with different nominal values. In-store prices should also be marked with the old and new rupiah prices.

“A pair of shoes, for example, should have two price tags, Rp 300,000 in the old currency and Rp 300 in the new currency,” he added.

Meanwhile, banking analysts have warned BI to take the lead in explaining the planned redenomination of the rupiah so people know how it would affect the value of the currency.

“The public deserves clear and complete explanations from the central bank so that people will know what will happen when their currency is redenominated,” Bank Danamon economist Anton Gunawan said.

He said BI should also ensure the public knew the difference between the planned redenomination and the devaluation of the currency in the 1960s.

“Of course the public is confused, because there’s no explanation as to what will happen when a currency is redenominated,” he added. (ebf/est)

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