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BI told to educate public on money change
Bank Indonesia’s plan to redenominate the rupiah has received a positive response from businesses and analysts, who agreed that the plan would benefit economic transactions
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ank Indonesia’s plan to redenominate the rupiah has received a positive response from businesses and analysts, who agreed that the plan would benefit economic transactions.
However the central bank should make an extra effort to explain the proposal to the general public to avoid creating social problems, agreed economic observers.
“It would give incentives to foreigners as foreign investment is growing right now. It’s about time for the central bank to further study and implement the redenomination plan,” said Bank Mandiri economist Martin Panggabean.
Bank Danamon’s Anton Gunawan agreed, saying that the plan was timely since the value of Indonesia’s currency against other currencies was currently too low.
The rupiah is currently the third-lowest-priced currency in term of its exchange rate to the US dollar, after Mozambique’s metical and the Vietnamese dong.
BI unveiled a plan last week to redenominate the nation’s currency. The move sparked concern that the general public was not well-informed on the issue and might believe the rupiah’s value was being decreased.
BI’s acting Governor Darmin Nasution called a press conference Tuesday to address concerns, stating that the proposed redenomination would not inflict any financial losses and would only strike a few zeros off of current bank notes.
Vice President Boediono summoned Darmin and Finance Minister Agus Martowardojo later in the day to clarify the central bank’s proposal.
Boediono said after the meeting that the central bank was still studying the proposal.
Agus said that the Finance Ministry had not officially discussed the redenomination proposal.
“It’s still a BI study or assessment. It’s not final,” Agus added.
Eliminating several zeros from rupiah bank notes would create a positive psychological impact for investors, as the perceived gap with other currencies would be smaller, Indonesian Chamber of Commerce and Industry (Kadin) vice chairman Chris Kanter, told The Jakarta Post.
“The rupiah is now trading at Rp 9,000 per US dollar. Under the new denomination, it would trade at Rp 9 to the dollar. Investors will perceive our currency as something stronger than before,” Chris said.
Several observers agreed that implemention of the proposal depends upon the central bank’s ability to educate the general public.
Indonesian Employers Association (Apindo) chairman Sofjan Wanandi said that the businesspeople would not have any problem with the redenomination proposal.
The central bank should, however, clearly inform the plan to the small people especially those living outside the cities, he said, adding that it would create social problems if it failed to do so.
Darmin said BI would carry out redenomination plan in four stages over 10 years to minimize public confusion.
The first phase will be an information campaign to alert the public in 2011-2012, second will be a transition period between 2013-2015 when BI will circulate both old and new rupiah bank notes with different nominal values, third will be the gradual withdrawal of “old” rupiah bank notes from 2016-2018 and finally a complete transition to the “new” rupiah bank notes from 2019-2020. (est)
