The newly elected Central Bank governor, Darmin Nasution, has announced the long term plan of Central Bank to adjust the currency by deleting the thousand of current value. For instance Rp. 1000 will be Rp. 1. The goal is just to simplify the figures and redenomination will not have any effect to its value. On paper there will be no troubles at all about currency redenomination. In today's transaction we hardly see goods or services pricing at less than Rp. 500, let alone Rp. 100 as stated by Megawati.
Some experts say redenomination will make the transaction simpler and make the ATM machines have less burdensome. Certainly, it is not true. Both transactions and ATM machines' burden will be the same. In the new denomination, there will not be the notes of Rp. 100.000. Imagine, who will bring Rp. 100.000.000 in their pockets? Instead, the ATM machines will serve Rp. 50 replacing Rp. 50.000 and Rp. 100 replacing Rp. 100.000.
It is inflation that creating the weaker value of currency. And years after years, the figures will be bigger. In 1970's, the rich people is dubbed as a millionaire. And now if you have millions rupiah, you are not deemed as a rich people.
Redenomination is not a new policy. For the last 85 years, there are 50 countries implemented the redenomination of its currency. German was the first country to do this in 1923 in the wake of hyperinflation. The German's government deleted 12 zeroes of its value. Turkey adjusted its lira in 2005 by dumping 6 zeroes. Compared to Indonesia's plan cutting 3 zeroes, the central bank will cut less zeroes than Turkey and German.
So, as an idea, Indonesian rupiah redenomination is not wrong at all. And I think we should accept this idea, because too many figures in currency mean nothing. Pak Darmin, please go ahead and forget about Ibu Megawati's comment. Frankly speaking, Ibu Megawati is the one who is very afraid about redenomination, because her name will be Kilowati.
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