T

he government has approved Bank Indonesia’s proposal to omit three zeros off the Indonesian currency, a minister says.

Finance Minister Agus Martowardojo said on Tuesday that the government would submit a draft law on the redenomination plan to the House of Representatives (DPR) next year to support the program.

The minister said that the draft of the redenomination bill, which was currently being finalized by the central bank and the government, should first receive approval from the Law and Human Rights Ministry, before being submitted to the House.

“If the bill is passed, there will be five to 10 years for the implementation. So, this is a good process and we support it, but it won’t happen overnight. We will take lessons both from successful countries and those failing to implement redenomination. We hope Indonesia’s case will succeed,” he told reporters.

 BI announced that the rupiah’s redenomination would be carried out in four stages over 10 years to minimize public confusion: information campaign to alert the public (2011-2012), transition period (2013-2015), the gradual withdrawal of the “old” rupiah (2016-2018), and the use of the “new” rupiah (2019-2020).

 Puji Atmoko, BI’s team leader for payment system regulations, said the harmonization team, led by Vice President Boediono, has agreed to slash three zeros off the rupiah despite various suggestions to cut up to four zeros. It means that Rp 1,000 will become Rp 1, but the value will remain the same.

The central bank is proposing the rupiah redenomination because its exchange rate is “too low against other currencies”, and as part of the country’s efforts to comply with regional economic reforms to coincide with the establishment of the ASEAN Economic Community in 2015, BI Governor Darmin Nasution has said.

At present, the rupiah (9,100/US$1) is the third-lowest-priced currency in terms of its exchange rate to the US dollar, after the Mozambican metical (23,100) and the Vietnamese dong (16,000). Cutting three zeros off the rupiah would turn the rupiah rate into Rp 9.1 per US dollar.

Harry Azhar Aziz, vice chairman of the House’s Commission XI overseeing finance and banking, urged the government and BI to be proactive in educating the public on the drastic change of the nation’s currency.

 Earlier in June, the House passed a new currency bill into law, giving new authority to the government to be involved in the planning, printing, circulation, withdrawal and abolishing of the nation’s banknotes for check and balance purposes.

 BI was previously the only entity responsible for such duties but as of Aug. 17, 2014, the banknotes will be overseen by the government, with the finance minister’s signature on them, in addition to members of BI’s board of governors.