Jakarta, hitclubapk3 Indonesia
—
Issue
redenomination
is being hotly discussed in Indonesia.
The government, through the Ministry of Finance, is finalizing plans to simplify or redenominate the rupiah currency in 2027. Later, Rp. 1,000 will become Rp. 1.
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The redenomination policy basically consists of simplifying the nominal digits of currency without reducing its real value.
Quoted from the website of the Indonesian Constitutional Court, the rupiah currency redenomination policy is basically a fundamental policy that has far-reaching consequences for the monetary system, financial transactions and the economic psychology of society.
The Zimbabwean Case
Redenomination policies have been implemented in a number of countries such as Türkiye, Brazil, Afghanistan and Zimbabwe.Some have succeeded, but others have failed, like Zimbabwe.
This African country implemented a redenomination policy three times, namely 2006, 2008 and 2009.
Even though it has redenominated three times, this country’s finances are not getting any better.Zimbabwe’s economy is even more ‘battered’.
In 2006, Zimbabwe’s currency had its number reduced by three digits.So, ZWN1,000 turns into ZWN1.
However, because there was too much money in circulation, inflation eventually got out of control and the redenomination attempt failed.In fact, in 2007, Zimbabwe’s inflation reached 1000%.
Then, in 2008 the same policy was adopted again by changing the currency code from ZWN to ZWR.
In this redenomination, Zimbabwe not only reduced the 3-digit zeros, but changed ZWN10,000,000,000 to ZWR1.
Finally, in 2009, the Zimbabwean currency underwent another redenomination and changed the code from ZWR to ZWL.
This time, the government deducted 12 zeros, so ZWR1,000,000,000,000 is equivalent to ZWL1.At this time, the price of three eggs had to be exchanged for a wad of hundreds of millions.This means that the value of the currency is no longer valuable.
What caused it?
The Financial Times website wrote that in 2009, the President of Zimbabwe was forced to abandon its currency, which had skyrocketed due to hyperinflation, and adopt the dollar as its main medium of exchange.
As a result, forced dollarization made the economy even more devastated.The money supply became completely dependent on dollar inflows, essentially eliminating authorities’ control over monetary policy.
This was followed by a decline in the level of public confidence in the Zimbabwean dollar and they became accustomed to using foreign currencies.There were many foreign currencies in use at that time.
Some argue that Zimbabwe adopted the redenomination policy when inflation was skyrocketing, which made the country’s economy even more battered.
(imf/bac)
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