Bank Indonesia Ready to Restart Talks on Rupiah Redenomination
Jakarta. Bank Indonesia is ready to restart discussions with the House of Representatives on the redenomination of the rupiah, a director at the country's central bank said on Wednesday (24/05).
The plan to slash some zeroes from the country's currency has been floated since 2010, but it faced several setbacks, ranging from global financial shocks, to lawmakers not having enough time to deliberate the matter.
"We are ready anytime the government or the House ask for a discussion. But the timing is not for us to decide," said Dody Budi Waluyo, Bank Indonesia's head of economic and monetary policy.
Bank Indonesia Governor Agus Martowardojo said in December that the central bank asked President Joko "Jokowi" Widodo and the House to revive the discussion on the rupiah redenomination bill this year.
The bill however, was not included in the House's legislation program for this year because lawmakers believed Bank Indonesia did not adequately brief them on the matter.
Former President Susilo Bambang Yudhoyono submitted the redenomination bill to the House in 2013, but lawmakers put it on the backburner at the time, describing it as "taper tantrum" – referring to the US Federal Reserve's plan to scale down its massive quantitative easing program, which caused instability in Indonesian financial markets.
Bank Indonesia said earlier that the rupiah redenomination requires stable economic and political conditions over a transition period, during which the country will use two price tags for all goods and services, to reflect the old and new currencies.
"It would need about seven years to complete the redenomination process," Dody said.
Eric Sugandi, chief economist at the SKHA Institute for Global Competitiveness, said now is the ideal time for Indonesia to start the redenomination process.
He noted that inflation has been maintained at low levels, the rupiah exchange rate is favorable and economic growth is stable.
"The key is in the dissemination of the information to the public during the [transition] period, when we would use two price tags," he said.
I Gusti Agung Rai Wirajaya, a member of House Commission XI, which oversees finance and banking, said lawmakers welcome the Bank Indonesia initiative.
"If Bank Indonesia is ready, we are also ready," he said.
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