JAKARTA - Redenomination of the rupiah lacks the urgency to be discussed this year and should wait for economic stability, said Head of Center for Strategic and International Studies (CSIS) Indonesia's Department of the Economics Dr Yose Rizal Danuri.
Redenomination, he said, requires a transition period of at least seven years because it also involves price adjustments for goods and services. However, he agrees with the Ministry of Finance's plan to discuss redenomination starting from 2021 until 2024.
"There would be no problem if we discussed it now and implemented it six years later, because we do need [redenomination] and we need to ensure that it will not impact on prices and the value of the rupiah," Dr Danuri said as quoted from CNN Indonesia, Tuesday (7/7).
Accorrding to him, redenomination has a strategic function and can simplify administration, especially on digital platforms. However, he warned that the government needs to be wary of the psychological impact of redenomination, which could result in an inflation.
"[The policy] needs to be communicated adequately to minimise the psychological effect. We have not seen such effort so far. The [Redenomination] Bill includes a transition period, which I think should last until 2030," he said.
Recently talks of redenomination have resurfaced following the issuance of Minister of Finance's Regulation No. 77/2020 on the Ministry of Finance's Strategic Plans for 2020-2024. In the regulation, Finance Minister Sri Mulyani Indrawati has included the Redenomination Bill as one of the bills proposed for the Mid-Term National Legislation Programme for the 2020-2024 term. (MS)