Background. On 10 October, the MOF issued Ministerial Regulation No. 70/2025, which unveils the medium-term strategic plans for 2025 2029 and includes the plan for Rupiah redenomination. Separately, on 10 November, BI confirmed that the Redenomination Bill has been included in the 2025 2029 medium-term legislative program, with a target completion in 2027 the Rupiah redenomination plan was initially set in 2010. While it remains unclear how many zeros will be removed, an old MOF document suggests a reduction of three zeros meaning IDR1000 would become IDR1.
Currency redenomination 101. Currency redenomination is a recalibration of the unit of accounts by removing zeros from banknotes. This process does not change the currency s purchasing power, implying an adjustment also in the price tags of goods and services. Redenomination is not the same as a devaluation or sanering of the currency. In 1950, 1959 and 1965, Indonesia conducted sanering by reducing the value of the currency in response to hyperinflation e.g., bank deposits above IDR25k were cut by half, and IDR500 1,000 bills were devalued by 90%.
Main objectives. The main objective of redenomination is to make transactions more efficient. In addition, it is expected to improve Rupiah credibility, although this is largely a money illusion. The Indonesian Rupiah is currently the fifth currency with the most zeros per dollar and three zeros redenomination implies USD/IDR of 16.7 from the current 16,700 (Exhibit 1). Redenomination also simplifies accounting and price quotations.
Long process. The redenomination law must first be passed by Parliament, which is likely to take place only in 2027. We believe implementation will follow sometime after, as public communication and education will be crucial. The process should be gradual, with a transition period during which the old and new currencies coexist. Financial infrastructure, including payment systems, accounting, and pricing mechanisms must also be updated. We believe the introduction of the new currency will only begin around 2029.
Education is key. Failure in communication and education could lead to public confusion and transactional errors. In this case, price rounding could occur, creating an inflationary perception. Negative sentiment could also spill over to the exchange rate, leading to Rupiah depreciation. Maintaining macroeconomic stability will be critical during the transition and implementation phases. Many countries have carried out redenomination s in the past, including Turkey (2005) and Venezuela (2021), typically as part of post-hyperinflation strategies (Exhibit 2). Indonesia, however, has never conducted a redenomination since experiencing hyperinflation in 1963 1965.
Illegal hoarded cash. A key question is what would happen to illegally hoarded cash, including assets associated with crimes such as drug trafficking or corruption. Depositing this money into the banking system would expose it to seizure by authorities, leaving conversion to other assets as the only option. Converting it into foreign currency or alternative assets could trigger capital outflows.
Our view. Rupiah redenomination is a symbolic policy and will not have a fundamental impact on the Rupiah s purchasing power or its intrinsic value against other currencies. The real effective exchange rate, which measures a currency against a basket of other major currencies adjusted for inflation differences, is more important for economic fundamentals. Over time, simplification and more efficient transactions could benefit the economy. However, poor communication poses the risk of eroding public confidence in the Rupiah and weakening its value during the transition period.
