Indonesia Moves Toward Rupiah Redenomination Amid Debate Over Economic Impact

Furedata - Finance Minister Purbaya Yudhi Sadewa has integrated a currency redenomination initiative into the ministry’s strategic plan for 2025-2029. This policy is formally established under Minister of Finance Regulation (PMK) Number 70 Year 2025, signaling a major monetary shift for Indonesia.

The Directorate General of the Treasury has been assigned to draft the bill on Rupiah revaluation. This legislative process targets the completion of a regulatory framework by 2026, with finalization of the bill slated for 2027, according to the official timeline set forth.

This initiative aims to improve national economic efficiency, preserve exchange rate stability, and bolster the Rupiah’s credibility. Officials stress that it is a nominal simplification, fundamentally different from a currency devaluation or sanering, which reduces purchasing power amid economic turmoil.

This process simply removes zeros from currency and prices, streamlining accounting and payment systems. However, Bank Indonesia cautions that a successful transition depends on stable inflation, economic credibility, financial system preparedness, and effective public awareness campaigns before implementation.

Indonesia remains among a group of nations with high-denomination currencies, alongside countries such as Vietnam and Iran. With its largest banknote at Rp100,000 and an exchange rate exceeding Rp16,000 per US dollar, the Rupiah reflects this characteristic of having many zeros.

According to Tempo (November 9, 2025), The redenomination plan has drawn criticism from economist Syafruddin Karimi of Andalas University. He contends the policy is a misstep, diverting focus from the crucial objective of improving national productivity to reach an ambitious 8 percent economic growth target for the country.

Karimi challenges the assertion that simplified accounting will spur investment, noting a lack of empirical evidence. He believes the projected advantages are primarily psychological and symbolic, offering an "illusion of stability" rather than tangible economic gains for the public.

He also notes that such monetary reforms are usually prompted by urgent crises like hyperinflation, which is not Indonesia's current situation. Karimi warns of the significant fiscal burden, citing the immense costs of reprinting currency and overhauling financial software systems.

To genuinely strengthen the Rupiah, Karimi advises focusing on economic fundamentals. He recommends policies that control inflation, bolster the trade balance, and ensure prudent debt management, arguing these actions deliver real value, unlike cosmetic numerical changes.