Prepare for this : re-denomination of IDR1,000 to IDR1.

[pantaiema]

Kapan Ubah Rp 1.000 Jadi Rp 1 Dimulai, Ini Jawaban Bos BI

Gubernur BI mengungkapkan redenominasi rupiah harus dengan memperhatikan tiga faktor berbagai situasi perekonomian di tanah air.

www.cnbcindonesia.com

Wah, BI Sudah Siapkan Desain Redenominasi Rp 1.000 Jadi Rp 1

BI ternyata sudah menyiapkan desain redenominasi rupiah sejak lama.

www.cnbcindonesia.com

In other countries such as in Zimbabwe, Mozambique, Argentina, Redenomination is actually the way to control the hyper inflation .
While redenominasion is uncommon in developed world, it is not new in Indonesia. As I understand it, it is quite similar to "sanering" (from the Dutch word) or Indonesian word "Pemotongan Uang". People say devaluation, redenomination and "Sanering" are different. At least that is what has been explained by the Indonesian Central bank.

But whatever they said, just be prepared that the value of your IDR100m after redenomination will only be worthy IDR100k. A lot of people will cry. People could easily see what happened in Zimbabwe, Mozambique, Argentina in the past when Redenomination happened

Is it the right decision ? I do not know people might want to share their opinion. But I think avoidance to have too much exposure to IDR is the way to go, before there is a certainty about this.

This is example of Redenomination 1,000 to 1 in Zimbabwe

Redenomination: Examples of Currency Rebalancing

Redenomination is the process of changing the value of a currency, typically due to hyperinflation or when a new currency is adopted.

www.investopedia.com

 

[Samoerai]

Yes, I just check your links. Indonesia is ready to implement, but waiting for the right timing ...
Actually redomination did happen in the Euro zone. And after implementation of the "euro" .. all the prices went up. Example .. a haircut in NL would cost let's say10 gulden and after implementation 10 euro (= 22,30 gulden). A cup of coffee .. 1,80 gulden .. became 1,80 euro and often just rounded to 2,00 euro. So, inflation big time. But the politicians kept denying. Will happen in Indonesia too, if .. if they will implement.

However, it's interesting that BI is saying to wait for the right time .. meaning .. rupiah is weakening .

 

[pantaiema]

This is the explanation from the Indonesian Central Bank the difference between Re-denomination vs Sanering (Dutch word)

Redenominasi Rupiah 1965, Sejarah dan Perbedaannya dengan Sanering

Oleh Berita Bisnis

kumparan.com

But from Zimbabwean example (the link above) it seems the Re-denomination and "Sanering" have the same impact.

I was trying to find the English equivalent wording for "sanering" but can not find it. It seems they refer to the same term e.g Re-denomination

 

[Samoerai]

This is the explanation from In the indonesian Central Bank the difference between Re-denomination vs Sanering (Dutch word)

Redenominasi Rupiah 1965, Sejarah dan Perbedaannya dengan Sanering

Oleh Berita Bisnis

kumparan.com

But from Zimbabwean example (the link above) it seems the Re-denomination and "Sanering" have the same impact.

I was trying to find the English equivalent wording for "sanering" but can not find it. It seems they refer to the same term e.g Re-denomination

Saneren (dutch) .. clean up, make better.

 

[pantaiema]

Yes, I just check your links. Indonesia is ready to implement, but waiting for the right timing ...
Actually redomination did happen in the Euro zone. And after implementation of the "euro" .. all the prices went up. Example .. a haircut in NL would cost 10 gulden and after implementation 10 euro (= 22,30 gulden). A cup of coffee .. 1,80 gulden .. became 1,80 euro and often just rounded to 2,00 euro. So, inflation big time. But the politicians kept denying. Will happen in Indonesia too, if .. if they will implement.

Yes I remember that, the street vendors, the restaurants, hotels, entry fees to the entertainment venues in the Netherlands or in Germany simply changed the price of their items, goods, services f10, DM10 to become EUR10 as simple as that. Well at least it meets its goal, e.g. simplification even it is in a different direction.

 

[Helpful Herbert]

They've only just introduced a whole new set of banknotes..

 

[Balifrog]

They've only just introduced a whole new set of banknotes..

Anyway, such a change of denomination will take time and (hopefully) a lot of preparation..
Took years to prepare for the Euro.

BTW, the French Franc went through a 100:1 split in 1960, called the "new franc".
I remember my grandmother even in the 80's stil counting in "old francs"

French currency : the euro and the French Franc

The French currency is currently the euro but previously the Franc had been used for several centuries

www.francethisway.com

 

[fastpitch17]

Yes, I just check your links. Indonesia is ready to implement, but waiting for the right timing ...
Actually redomination did happen in the Euro zone. And after implementation of the "euro" .. all the prices went up. Example .. a haircut in NL would cost let's say10 gulden and after implementation 10 euro (= 22,30 gulden). A cup of coffee .. 1,80 gulden .. became 1,80 euro and often just rounded to 2,00 euro. So, inflation big time. But the politicians kept denying. Will happen in Indonesia too, if .. if they will implement.

However, it's interesting that BI is saying to wait for the right time .. meaning .. rupiah is weakening .

Indonesia has been talking about redenomination for what, 15, 20 years and still waiting for the right time.

 

[pantaiema]

Indeed they have been talking about redenominasi since 2010 and socialisation in 2011.

BI Tuntaskan Studi Redenominasi Rupiah Akhir 2010

BI akan menyelesaikan studi redenominasi atau penyederhanaan nilai tukar rupiah pada akhir 2010. BI akan melanjutkannya dengan sosialisasi mulai awal tahun 2011.

finance.detik.com

But what is different this time is that Redenomination Draft Law (RUU) was included in the Ministry of Finance's 2020-2024 Strategic Plan, It was stipulated in Minister of Finance Regulation (PMK) Number 77/PMK.01/2020.

"So we have prepared for the redenomination a long time ago, the design problem, then also the problem of the stages. We have prepared it a long time ago," Perry said in a Press Conference on the Results of the BI Board of Governors Meeting, Friday (23/6/2023)"

It is just that, it will be based on several conditions. and it will need to be implemented with care to avoid hyper inflation. People will need to be very naive to think that there will be no inflation. Just look at to what happen in Zimbabwe, Mozambique, Argentina.

Kapan Waktu yang Tepat Bagi RI Ubah Rp 1.000 Jadi Rp 1?

Dalam kebijakan redenominasi ini, BI dan pemerintah harus seiring dan seirama.

www.cnbcindonesia.com

"The main consideration for forcing redenomination when inflation is still high is the fear of hyperinflation. This is triggered by a change in nominal currency resulting from redenomination causing traders to increase the rounding price up," he explained to CNBC Indonesia, Tuesday (21/3/2023). For example, the price of goods before the denomination of the Rp. 9,200 denomination is then impossible to become Rp. 9.5 after the redenomination, most of the prices are made to Rp. 10. There is a new nominal rounding up. As a result, the price of goods will increase significantly. This is difficult for the government to control and BI. What are the consequences? Hyperinflation can even lead to a crisis if you're not careful,"

 

[jstar]

Yes I remember that, the street vendors, the restaurants, Hotels, entry fees to the entertainment venues in the Netherlands or in Germany simply changed the price of their items/services f10, DM10 to become EUR10 as simple as that. Well it meets its goal, e.g. simplification.

Simplification? At first there was a period in which it was possible to pay in both currencies. Chaos. And the grabflation went beserk, esp. since as you say in some currencies it became a one to one conversion. But even if you had 42 Belgian Francs for a coffee to become 1 euro, it was very simple to make the price of the coffee €1,15. Nobody would realize that (and they didn’t have a smartphone available to calculate on the spot).

And can you imagine if in Indonesia they would introduce decimals? Even bigger chaos. Perhaps that’s the reason why they think about 1.000 1 now, instead of 10.000 1. To avoid the decimals. (That’s one of the smarter ideas of the whole thing.)

 

[jstar]

Sanering has nothing to do with the Dutch word anymore. (It‘s even pronounced very differently.) Over there it’s practically never used in an economic context, it means to clean up. Like a plot of land where a chemical factory or gas station was based.

Over here it simply means devaluation. That’s something very different from redenomination. Indonesia had its share of that one too.

 

[Samoerai]

Simplification? At first there was a period in which it was possible to pay in both currencies. Chaos. And the grabflation went beserk, esp. since as you say in some currencies it became a one to one conversion. But even if you had 42 Belgian Francs for a coffee to become 1 euro, it was very simple to make the price of the coffee €1,15. Nobody would realize that (and they didn’t have a smartphone available to calculate on the spot).

And can you imagine if in Indonesia they would introduce decimals? Even bigger chaos. Perhaps that’s the reason why they think about 1.000 1 now, instead of 10.000 1. To avoid the decimals. (That’s one of the smarter ideas of the whole thing.)

Yes, here in Indonesia too, prices of some products are rounded, e.g. Rp 49.500 will be Rp 50.000 or even worse Rp 61.100 will be Rp. 62.000 causing inflation. See the photo.

And what about the "bensin" price?

 

[jstar]

Of course there would be regulations on rounding up. As if anybody would care.

 

[centurion]

Yes, I just check your links. Indonesia is ready to implement, but waiting for the right timing ...
Actually redomination did happen in the Euro zone. And after implementation of the "euro" .. all the prices went up. Example .. a haircut in NL would cost let's say10 gulden and after implementation 10 euro (= 22,30 gulden). A cup of coffee .. 1,80 gulden .. became 1,80 euro and often just rounded to 2,00 euro. So, inflation big time. But the politicians kept denying. Will happen in Indonesia too, if .. if they will implement.

However, it's interesting that BI is saying to wait for the right time .. meaning .. rupiah is weakening .

Redenomination did not happen in the Eurozone, but the change of currency. This generated uptick in prices, while the obligations and liabilities of the companies stayed the same. This made an extra profit for the companies, especially where the value of the old currency was near the new denomination (i.e. 2 German Marks-1 Euro).

 

[centurion]

Simplification? At first there was a period in which it was possible to pay in both currencies. Chaos. And the grabflation went beserk, esp. since as you say in some currencies it became a one to one conversion. But even if you had 42 Belgian Francs for a coffee to become 1 euro, it was very simple to make the price of the coffee €1,15. Nobody would realize that (and they didn’t have a smartphone available to calculate on the spot).

And can you imagine if in Indonesia they would introduce decimals? Even bigger chaos. Perhaps that’s the reason why they think about 1.000 1 now, instead of 10.000 1. To avoid the decimals. (That’s one of the smarter ideas of the whole thing.)

The Indonesian Rupiah had decimals. One rupiah had 100 sen (maybe still, but no coins anymore).

 

[jstar]

The last time the cent was used was before I was born. So I don’t think there are any transactional systems still operational with sen. Probably the governmental systems still have it? It was quite an effort to introduce the euro in countries as Italy Belgium. Some (home grown or commercial) systems had to be replaced completely, a bit like Y2K.

I remember from a long long time ago the people refused the 50K notes with Suharto’s image. Esp. in the north of Jakarta.

 

[R Cameron]

I can not recall the last time I was given change with the 100 or 200 coins, and even 500 coins are becoming rarely used. Practically nothing would change if all the Rupiah coins disappeared today. So if everything can be the same with 1000 as a the smallest, it would be a simple redenomination to lose 3 zeros. Of course most menus and price lists of items 1,000-500,000 already drop 3 zeros, often not even using an "rb" or "k" to symbolize the thousand, and no one has any problem understanding.

The CNBC article above calls it, "penyederhanaan rupiah" and I think that is a very good description.

And especially with colored currency, the change will be even less impactful. People use color and imagery more than the printed number to know what bill to pluck from their wallet and to know what they are handed.

What will the benefits be of removing 3 zeros? Far fewer zeros typed into computers (spreadsheets, taxes, currency conversion, online shopping) and ATMs, and fewer financial mistakes by typing the wrong number of zeros. Those aren't huge benefits, but it will be a tangible improvement in my life.

I wholly welcome the change, if it ever comes.

 

[Samoerai]

I can not recall the last time I was given change with the 100 or 200 coins, and even 500 coins are becoming rarely used

I have a lot of these coins in my shoulder bag. Every day the cashiers in the shops when paying cash, give me these 100, 200, 500 and 1000 coins.

 

[Vulgarian]

I miss being given sweets instead of small change. Haven't seen that for years - regulated out, I guess.

 

[pantaiema]

Simplification? At first there was a period in which it was possible to pay in both currencies. Chaos. And the grabflation went beserk, esp. since as you say in some currencies it became a one to one conversion. But even if you had 42 Belgian Francs for a coffee to become 1 euro, it was very simple to make the price of the coffee €1,15. Nobody would realize that (and they didn’t have a smartphone available to calculate on the spot).

It seems to me, in the stock market this Re-denomination is quite similar to "reverse split". It typically happens to low quality penny stock to meet the minimum price to maintain listing in the stock market. Differentiate stock "reverse split" with "split". Split will only happen in the high quality stock which such as Amazon, Tesla, Alphabet (google) where the price keep increasing making them to look expensive. The impact of both on the stock price are entirely different even it is just a simple math of either division or multiplication.

Whatever simplification, math argument are presented, etc. in the reverse split, the stock price will always cause the price of the stock in question under pressure to go even lower after the reverse split.

Exuberance will always exist in the society. You can not control the behaviour of hundred of millions of people acting at the same time.

In the currency re-denomination such as in this topic reducing "three zeros" imo is indeed simple, easy to say. It is a simplification for the vendors, accountants, bankers. But it is deprivation for little people on the street as it is almost certain it will be followed by inflation but their income will not increase. The good real examples of redenomination in the history are Zimbabwe, Mozambique, Argentina. But I think it is a different condition with Indonesia as at that time these countries were prompted by the hard choices between the two evils. Meanwhile Indonesia has more urgent to do such as to combat corruption, the radical religious extremists.

Redenomination - Wikipedia

en.wikipedia.org

I personally do not buy the argument of digit simplification, cutting three digit argument, as IDR is still much better than other ASEAN currencies such as Vietnamese Dongs, Laotian Kip.

Also if the price is displayed in the shop it is easier to miss one digit of zero (0) than three digits of zeros (,000). If you go to the exclusive shopping centre such as
Beverly Center in LA
Harrods in London
Galeries Lafayette in Paris
If you miss one zero in the price tag it will be very costly for you. It is entirely different if it is displayed in three digit of zeros which is very noticeable.