Gone are the days when you could point to something worthless and say "That thing's only worth one Rupiah". Well, it will disappear over the next ten years.
WHY IS THAT SO?
Bank Indonesia, the central bank of Indonesia, has recently announced plans for redenomination of the Rupiah - in other words, to erase off the last two or three (probably 3) zeroes on the currency over the next 5-10 years. The main reason for doing so is because lots of transactions today involve a lot of zeroes - buying a house cost literally billions of rupiah. Computers don't work well with too many zeroes. To improve efficiency when working with spreadsheets, and to bring the Rupiah closer in line with its ASEAN counterparts, the Bank sees a rationale for chopping off the zeroes in the Rupiah.
HOW?
As you can imagine, redenomination might be a complicated process which will take some time - 5 to 10 years, if approved by the House of Representatives. According to the Bank Indonesia Governor Darmin Nasution, it would be carried out in 4 phases:
Phase 1: 2011-2012:
Information campaign to alert the public.
Phase 2: 2013-2015:
Transition Phase, in which the country will have 2 notes in circulation - the 'Old' Rupiah and the 'New Rupiah'. All prices will have to show prices in 'Old' and 'New' Rupiah. Transactions can be carried out in either currencies.
Phase 3: 2016-2018:
Gradual Withdrawal of the 'Old Rupiah'.
Phase 4: 2019-2020:
Completion of Transition - 'Old' Rupiah will be completely out of circulation, 'New' Rupiah will be printed without the 'New' word.
YOU MEAN THEY'VE ONLY THOUGHT OF DOING THIS NOW?
Not exactly. Past governors have tried to manipulate both the money supply and the exchange rate in desperate attempts to maintain the value of the Rupiah. In the 60 years of existence, the currency has been affected by inflation, financial crises, as well as political instability. In fact, rampant Inflation in the 1960s (up to 600% in 1965) lead to revaluation of the currency and the introduction of a 'new' Rupiah at a rate of Rp 1 (new) = Rp 1000 (old). In other words, we have been hiding 3 zeroes from our currency all these years.
Arguably, the reason past currency revaluations didn't really work was because of people's sentiments at the time when the moves were carried out. In the 1965 revaluation of the Rupiah, goods prices did not drop in line with the currency revaluation - they rose in real terms. People just weren't as confident. Now, though, the economy is much more robust, inflation is much lower from the 600% of that time (albeit still a bit high at 5.5% CPI Y-o-Y). And because the money printing is done by the Central Bank, not the government, there is less risk of printing money to reduce the real value of debts.
SO...
I guess that's it, then. No more of those "I ran out of Rp200 coins for your change, so here's some sweets instead".
No more "That piece of stuff is only worth Rp1, not $1".
No more "I gave the money changer US$100*, now I'm a millionaire!".
Well, no more after the next decade. So, take the mick out of our currency, while you still can. Because come 2020, Rp1 might be worth US$0.11 or S$0.15, subject to exchange rate fluctuations.
*- US$111.95 = Rp 1.000.000,- as of time of posting. So, actually, that statement is no longer valid - you need US$12 more.
