Indonesia's Currency Redenomination Plans: A Complex Process

Current Status of Redenomination Plans

The Indonesian government and Bank Indonesia (BI) have put redenomination plans on hold, prioritizing economic stability and growth over currency simplification. Governor Perry Warjiyo emphasized that the central bank is currently focused on maintaining economic stability rather than pursuing redenomination. Finance Minister Purbaya Yudhi Sadewa reinforced this stance, stating that redenomination is not on the agenda for 2026.

Legislative and Implementation Challenges

The redenomination process faces significant legislative hurdles as it requires the creation of a new law. Chairman of DPR's Commission XI, Mukhamad Misbhakun, outlined that the process involves multiple stages: legislative discussion, socialization, transition, and implementation. If initiated promptly, the earliest possible implementation could be around 2029, following a typical timeline of: legislative approval in 2026, socialization in 2027, transition in 2028, and full implementation in 2029.

Economic Prerequisites and Potential Impacts

Several economic prerequisites must be met before redenomination can be considered viable: solid economic growth, low inflation, and political stability. Misbhakun noted that Indonesia currently meets these conditions with stable 5% economic growth and 2% inflation. However, the final decision rests with President Prabowo Subianto.

Potential Challenges and Benefits

While redenomination could simplify the economy and boost confidence in the currency by making it appear stronger, it also poses challenges. Misbhakun highlighted the need for massive socialization to prevent negative impacts, particularly on retail businesses that might round prices upward, potentially causing inflationary pressure. The process would also require amendments to existing laws such as Law No. 7/2011 on Currency and Law No. 24/1999 on Foreign Exchange Traffic and Exchange Rate System.