Jakarta. An Indonesian economist has warned that the government’s plan to redenominate the rupiah by removing three zeros without altering its purchasing power would be an expensive and risky project, potentially causing confusion across the financial system and among the public.

Syafruddin Karimi, a professor of economics at Andalas University, said the redenomination is not an urgent priority and could distract policymakers from addressing more pressing economic challenges.

“Redenomination is a diversion from unfinished major tasks -- Indonesia doesn’t need an illusion of stability in the form of new nominal values. What the country needs is meaningful growth for its people,” Syafruddin said on Sunday.

He argued that the process would require massive costs and technical complexity, as it involves printing new currency, upgrading banking software and accounting systems, and changing billions of price tags, contracts, and financial reports across the country.

“All of this demands huge funds, a long timeline, and a nationwide public education campaign,” he said.

During the transition period, old and new currency would circulate simultaneously, creating “administrative duplication, consumer uncertainty, and even opportunities for fraud,” he warned.

Small businesses, he added, would face particular challenges in adapting, while the public could fall victim to money illusion -- the mistaken belief that prices have fallen after the redenomination. “This could undermine price confidence and economic stability,” Syafruddin said.

The redenomination plan is outlined in a new Finance Ministry regulation issued earlier this month, which sets a target for drafting a Redenomination Bill by 2027. The ministry cited four main objectives: boosting national competitiveness and economic efficiency, maintaining macroeconomic stability, safeguarding purchasing power, and strengthening the rupiah’s credibility.

Syafruddin, however, rejected the notion of urgency, noting that redenomination is typically undertaken in countries facing hyperinflation -- a situation Indonesia does not face. He pointed to Indonesia’s current annual inflation rate, which remains within a safe and controlled range.

“If the government insists on pursuing this, it means diverting attention from its main priority: promoting real economic growth,” he said.

He added that tidying up the rupiah’s digits won’t improve national productivity. What’s needed, he said, are bureaucratic efficiency, legal certainty, and pro-business policies that drive sustainable growth.

“Every rupiah spent on redenomination represents an opportunity cost -- taking away resources from more strategic programs such as fertilizer subsidies, irrigation improvements, or MSME digitalization,” Syafruddin said.

The rupiah currently trades at around 16,680 per US dollar.

Add as a preferred source on Google +