Foreigners visiting Indonesia often joke that they become instant millionaires once they change their cash into the local currency, the rupiah.
Becoming a millionaire in Indonesia could be harder in the future.
The government is reviving a plan to eliminate three zeros off rupiah bank notes, which come in much higher denominations than many other currencies.
The move to redenominate the currency is aimed at simplifying transactions and making the rupiah more respected internationally, officials said.
“It’s for efficiency and also, a matter of prestige,” said Darmin Nasution, the coordinating minister for the economy.
“Ask foreign tourists who exchanged 300 dollars for piles of rupiah banknotes,” he said. “They might have thought: What kind of country is this?”
The rupiah is one of the world’s least valuable currencies. Banknotes come in denominations ranging from 1,000 to 100,000.
The currency plunged from about 2,000 to the US dollar to the level of 17,000 at the height of the 1997-98 Asian financial crisis. It is now hovering around 13,300 to the dollar.
A McDonald’s Big Mac currently costs about 38,000 rupiah.
The redenomination plan was first mooted in 2010, but was shelved because of global economic uncertainties triggered by the US decision to withdraw stimulus.
Proponents say now is the right time to seriously discuss the plan, considering the favourable economic conditions.
The country’s foreign exchange reserves are ample and inflation is at around 4 per cent, the lowest in years, while economic growth is at 5 per cent annually, they argue.
“Indonesia is economically and politically stable,” Bank Indonesia Governor Agus Martowardojo told local media.
“This initiative is good for the economy,” he added. “But of course, it will take years, as Indonesia is a large country and people have different levels of education.”
Muhammad Misbakhun, a legislator from the nationalist Golkar Party who advocates redenomination, said as a member of the Group of 20 (G20) developed and emerging countries, Indonesia should have a respected currency.
“The rupiah denominations don’t reflect the strength of our economy, which is the 16th largest in the world,” he said.
“Shoring up the rupiah’s credibility is a way to assert our economic sovereignty,” he said.
But he said a bill on redenomination, which is being drafted by the government, was not on a list of draft laws prioritized for discussion in parliament this year.
Many Indonesians support the idea of slashing those pesky three zeros off the banknotes.
“I think redenomination will be good for the rupiah,” said Indra Nugroho, a bank employee in Jakarta.
“Our money has been an object of ridicule for a long time and we are rather ashamed,” he said.
But some people fear that redenomination would create confusion and even instability as stores may engage in price gouging and stockpiling of goods.
An abrupt move by then-president Sukarno in 1959 to devalue the rupiah sparked social unrest.
Stores were closed as they refused to accept devalued bank notes and people used old bank notes to purchase goods in rural places where information about devaluation was scarce.
Officials insist that redenomination will not change the value of the currency, and old bank notes will be phased out gradually to allow people to familiarize themselves with new denominations.
“Good planning and a public education campaign will insulate the country from any negative impacts of redenomination,” said Andry Asmoro, an economist at CIMB Niaga.
“The transition can be a challenge in rural areas, so introduction should be gradual,” he said.
But some legislators are opposed to the redenomination plan.
“There’s no urgency whatsoever to redenominate the rupiah,” said Fadli Zon, a deputy speaker of the House of Representatives from the opposition Gerindra Party.
“The government should focus on reigning in the budget deficit” [which is approaching the 3-per-cent legal limit],” he said.