Dec. 17 – The Indonesian government has announced plans to reduce the number of zeros on the rupiah by three beginning in 2014. The redenomination will simplify payment processes in a national currency upon which many people already ignore the last three zeroes.
The country has one of the highest value denominated currencies in Asia, with only Vietnam and Mongolia having higher denominated banknotes. The phasing in of new banknotes will begin in 2014 and will continue until 2016. This means that for a three-year period there will be notes showing both units of measurement that will continue to be legal tender.
“This move will not disrupt payments, inflation and the economy as a whole,” said Perry Warjiyo, executive director for economic research and monetary policy at Bank Indonesia. “Bank Indonesia and the government will socialize the move to businesses, associations and the entire community starting next year.”
The current denomination system means that measuring Indonesia’s economy in its local currency can be problematic – simply remembering the terms involved in a deal or having equipment with enough zeros to calculate amounts have been persistent problems. For example, Indonesia’s banking assets this October were worth 4.029 quadrillion rupiah. Terminology aside, including all the zeros, this figure would be written as 4,029,000,000,000,000 rupiah.
“Even now, when we discuss gross domestic product, we use millions and billions as units, and restaurant menus show prices with thousands as the unit,” said Anton Gunawan, chief economist at PT Bank Danamon Indonesia in Jakarta.
The last two redenomination’s occurred in 1959, when 1,000 rupiah became 100 rupiah, and again in 1966, when 1,000 rupiah was redenominated as 1 rupiah. Had these changes not taken place, one U.S. dollar, which at current value today is worth 9,654 rupiah, would be valued at 9,654,000,000 rupiah.