Central bank must be honest about redenomination effort: Legislator

"So far, the central bank has always maintained that currency redenomination is just a process of simplifying the nominal value of money and it would not devalue the rupiah," ,ember of House Commission XI Zaini Rahman said.
Jakarta (ANTARA News) - Member of House Commission XI Zaini Rahman has stated that Bank Indonesia, as the central bank, should be honest about the main objective of the redenomination effort and its possible consequences on the economy.

"So far, the central bank has always maintained that currency redenomination is just a process of simplifying the nominal value of money and it would not devalue the rupiah," he said here on Thursday.

"However, people might still need to be shown how Rp 1,000 will actually be worth the same as the new Rp1. There are a lot of psychological aspects that need to dealt with in this matter," Zaini pointed out.

Therefore, he said, the central bank must make efforts to raise public awareness of the redenomination plan.

"For instance, Bank Indonesia should also be able to explain what will be done if the effort fails and how long will it take to decide whether the transition process has failed or succeeded," Zaini continued.

With regard to the central bank`s plans to publicize the redenomination effort in early January, he said: "There are some things that need to be underlined".

"First, it needs to tell the public that the effort might lead to inflation and cause some serious problems," he said.

"Second, the central bank should also consider that the transition costs would be enormous. BI should explain that the transition costs and the budget will not affect the people in any way," Zaini stated.

"Third, the central bank should pay attention to, and find solutions for, the psychological impact of the redenomination effort," he added.

Earlier, Finance Minister Agus Martowardojo said the government would begin its public consultation efforts from December this year until May 2013.

"We need to hold public discussions before introducing this policy because most people still think that redenomination will reduce the exchange value of the rupiah. But the truth is, this policy will only simplify the nominal value of rupiah and will not diminish the currency's economic value," Agus explained.(*)

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