Indonesian rupiah

Indonesian rupiah

Infobox Currency
currency_name_in_local = rupiah Indonesia id icon
image_1 = Indonesian Rupiah.jpg
image_title_1 = Rupiah banknotes, only the Rp 1000 and Rp 5000 notes are current
iso_code = IDR
using_countries = IDN
inflation_rate = 10.38%
inflation_source_date = [ Bank Indonesia] , May 2008
subunit_ratio_1 = 1/100
subunit_name_1 = sen
symbol = Rp
frequently_used_coins = Rp 100, 200, 500
rarely_used_coins = Rp 25, 50, 1000
frequently_used_banknotes = Rp 1000, Rp 5000, Rp 10 000, Rp 20 000 Rp 50 000, Rp 100 000
issuing_authority = Bank Indonesia
issuing_authority_website =
The rupiah (sign: Rp; code: IDR) is the official currency of Indonesia. Issued and controlled by the Bank of Indonesia, the ISO 4217 currency code for the Indonesian rupiah is IDR. The symbol used on all banknotes and coins are Rp. The name derives from the Indian monetary unit rupee. Informally, Indonesians also use the word "perak" ('silver' in Indonesian) in referring to rupiah. Some suburb people also usually use hokkien dialect to mention the nominal, such as "ce" (one) "no" (two) "go" (five) and combinate it with zero modifier such as "go ceng" (five thousand), "ce ban" (ten toushand) "go pe" (five hundred) etc. The rupiah is subdivided into 100 "sen", although inflation has rendered all coins and banknotes denominated in sen obsolete.

The Riau islands and the Indonesian half of New Guinea ("Irian Barat") had their own variants of the rupiah, but these were subsumed into the national rupiah in 1964 and 1971 respectively (see Riau rupiah and West New Guinea rupiah).



Current legal tender

The current rupiah consists of coins from 25 rupiah up to 1,000 rupiah, and from banknotes of 1,000 rupiah up to 100,000 rupiah. With US$1 generally worth 9-10,000 rupiah, the largest Indonesian banknote is therefore worth around US$10. 1 rupiah coins (dating from 1971) and 1 sen (from 1965) banknotes officially remain as legal tender for completeness' sake, but will never be seen in current circulation.

As the smallest current note is worth approximately US$0.10, even small transactions such as bus fares are typically conducted with notes, and the 1,000 rupiah note is far more common than the 1,000 rupiah coin. The government has however announced a change to this, with a new 2000 rupiah note to be issued in Q2 2008, and the 1000 rupiah note withdrawn, to be replaced with a coin. [] The measure is intended to cut the cost of issuing money. Hence denominations up to 1000 (~$0.10) would be handled in coin, and from 2000 (~$0.20) and up in notes.

Pre-1997 notes are no longer legal tender, due to the lack of security features and association with the Suharto regime, but can be exchanged in Bank Indonesia offices until 2010. [ [] ] Due to the low value of the notes below 1000 rupiah, although they are no longer being circulated, some remain in use in increasingly poor condition, as low denomination 'uang pasar' (literally "wet market money"), outside the banking system for use in informal transactions.

There are two legal tender series of Indonesian banknotes, the 1998-2001 series, which consists of the full range of denominations: 1000, 5000, 10000, 50000 and 100000 rupiah, and the 2004, 2005 updates of the higher denominations (10000 and above), with better anti-forgery devices.

ecurity features

* The materials of the banknotes basically are long fibres from any kind of wood, or a mix of different types of wood. However, the preferable material is the Abaca fibre, which is naturally plentiful in Indonesia and is believe to increase the durability of the banknotes. The banknotes are made with the process of heating, to create a unique type of pulp.

* The minimum security features for naked eyes are watermarks, electrotypes and security threads with color fibres. In addition to this, extra features may be included, such as holograms, Irisafe, iridescent stripes, clear windows, metameric windows and gold patches.
** Watermark and Electrotype are made by controlling the gap of density of the fibres which create certain images for the banknotes. This is done to raise the quality of the notes from the aesthetic view.
** Security threads are put in the middle of the note's materials so horizontal and vertical lines are shown from top to bottom. The threads also can be made with many variations such as the materials, size, color and design.

History of the Indonesian Rupiah

1600-1942 - Dutch Colonial Money

From the early 17th Century, the Dutch East India Company issued coinage (marked 'VOC', the Dutch East Indiea Company) in its territory of what was to become the Netherlands Indies. The firm went bust in 1800, and control over the territory reverted to The Netherlands. The first coins were struck in the name of what was then the Dutch government, the Batavian Republic, in 1802, with low-value copper duit coins, as well as silver and gold gulden coins. The gulden replaced various local currencies throughout the Indies, with the Sumatran dollar disappearing in 1824, and the Javan Rupee, which had been minted by the Dutch, in 1816. Some other kingdoms and Sultanates had their own coins until they fell under Dutch control, such as the Aceh keping (Aceh was finally conquered in 1903).

The first coins were produced in Indonesia in the twelfth century. These coins were gold and silver lumps issued by the Indianized kingdoms such as the Sailendras of Java and the Srivijaya of Sumatra. In the thirteenth century, imported Chinese bronze coins were adopted as the official currency. These were supplemented by gold and tin coins with Arabic inscription issued in Sumatra and Sulawesi. When Europeans began arriving in Indonesia, they brought with them gold coins from Portugal and Venice, and silver dollars from Mexico, Peru and Bolivia. Chinese and Japanese bronze coins were also imported along with Japanese gold coins and Indian rupees counterstamped by the Dutch.

The currency would be considered very stable by modern Indonesian standards, with the financial instrument for day-to-day transactions being low-value coins. One Netherlands Indies Guilder/Gulden (IDDG) was divisible into 30 Stuyvers or 120 Duiten until 1854 when the Guilder was decimalized and made divisible into 100 cents. The Treasury issued banknotes between 1815 and June 30, 1861 when the banknotes were withdrawn. The Treasury also issued banknotes between 1919 and 1943. De Javasche Bank was established in 1828 and began issuing banknotes in 1864. The Netherlands Indies left the Gold Standard on November 26, 1936. The notes were generally issued in denominations of 5 gulden and above, with smaller transactions easily handled in coin.

Dutch money circulated in the Netherlands East Indies from 1610 until January 14, 1817 when the Netherlands East Indies adopted the Guilder as its currency, at par with the Netherlands Guilder (NLG). This led to special issues of coins for the Netherlands Indies in 1821 and 1833. Thirty Stuivers equaled a rupee and 66 stuivers equaled a dollar. The Dutch produced coins especially for the Netherlands Indies in 1726. The Spanish Silver Dollar circulated in the Dutch Indies and was equal to 64 Stuivers or about 3.2 Dutch Guilders. The Netherlands Indies Paper Rijksdaalder was equivalent to a Spanish Silver Dollar. They also issued notes denominated in Spanish dollars dated 1 May 1812 and notes denominated in "Java rupees" dated 1814. Although the role of the government (to issue coin) and the circulating bank (to issue bank notes of 5 gulden and up) was well established, in 1919 the government began issuing 1 and 2½ gulden notes, to address the issue of metal hoarding, largely caused by World War 1. ½ gulden notes were added in 1920.

Upon the outbreak of World War II, gulden coins were once again hoarded, and the government issued 1 and 2½ gulden notes in 1941 to address the shortage (partly caused by supply problems from the coins, which were minted in the United States).

1942 - 1949 Japanese Invasion, and Indonesian independence - the dawn of hyperinflation in Indonesia

The Japanese Invasion

In 1942, the Japanese invaded the Netherlands Indies, taking control of the whole country, and Netherlands New Guinea, by March 1942. On their invading ships, they brought their own issue of the local money, the gulden. They liquidated the banks, including 'De Javasche Bank', and voided debt obligations. [] The notes issued by 'De Japansche Regeering' (the Japanese government) would be legal tender from March 1942 (although the existing notes remained valid), with notes printed from 1 cent to 10 gulden, by the new (as of April 1942) circulating bank Nanpo Kaihatsu Ginko.

The Japanese money was supposed to have the same value as the old Dutch money, with the old money to be recalled from use, but the invaders soon printed excessive quantities of money, and it was quickly apparent that hyperinflation was in progress, and hence people hoarded the Dutch money. By the end of the War, the Japanese had caused a massive increase in the paper money supply, which was 230 million gulden pre-war, to several billion post-war. This, plus the actions of the post-war Dutch administration, caused massive inflation and damage to the stability and economy of the country.

As their occupation continued, by 1944 the Japanese had determined that their long-term strategic interests were best furthered by encouraging Indonesian nationalism, and so it issued a second series of notes printed in Indonesian language, the Netherlands Indies roepiah.

Existing stocks of notes continued remained in use by the new Indonesian government until they had printed their own money in 1946, while the notes actually continued to be printed until early 1946 in parts of Eastern Indonesia (where the Nationalists did not have control), as a temporary measure until the Dutch had re-established their pre-war administration across the scattered islands.

Dutch/Allied re-occupation

The Dutch government, which was in exile in London, had been making preparations for the end of the war, whereupon it hoped to regain control over its colony. In order to do so, in recognition of the fundamentally altered financial conditions under which they would be issued, it was anticipated that a governmental issue would be needed, in view of the weakened position of the private De Javasche Bank, which had previously been issuing banknotes.

The notes were ordered in December 1942, printed in the USA by the Security Bank Note Printing Company. The notes were dated 'March 1943' and labelled as 'Nederlandsch-Indische Gouvernementsgulden' printed in Dutch, along with the additional Indonesian text indicating the denomination of the notes and the word 'roepiah'. Denominations were 50 sen to 500 gulden.

At the end of the war, the Allies 'Netherlands Indies Civil Administration' (army), began to retake control of the old East Indies. It began issuing the 1943-dated money (the 'NICA gulden'), starting from 1944 in New Guinea, and subsequently in Maluku and Borneo, both of which were recaptured before the Japanese surrender in August 14th 1945. In areas under NICA control, pre-war Dutch notes were demonetized. Despite the fact that NICA had control over the outer parts of Indonesia, its authority to dictate the value of money was limited by the economic weakness of the administration and of The Netherlands itself. As a compromise NICA re-monetized the pre-war notes of 10 gulden and below, higher-valued notes not re-issued to reduce the inflationary effect of having the pre-war currency as well as new NICA money in circulated. With the Japanese surrender, the administration was given official control of the institutions of the country by the Allies, and DJB, which had survived the war better than expected, was reincorporated on 10th October 1945.

Although the military action of the Allies in Eastern Indonesia and Kalimantan (Borneo) had introduced the NICA gulden into circulation in those areas, the transition back to Dutch control was not going to occur smoothly in the main islands of Java and Sumatra, and Allied military action gained control only over a few coastal enclaves, where Japanese money (large quantities of which were in storage by the Japanese).

The 'uang merah' ('red money' (the 10 rupiah note was red, and there may also be a reference to blood, as the money was unpopular with the Indonesian revolutionaries)) faced nationalist opposition to the principle of money issued by the Dutch, exarcebated by the fact that in spite of stated intentions to adopt a less colonial stance post-war, the notes had been printed in Dutch with a large picture of the Dutch Queen Wilhelmina.

When the first NICA money appeared in Java, Sukarno issued an immediate decree, of October 2 1945, to declare that the NICA notes were illegal.

With the lack of the kind of control needed to issue money effectively, the Dutch determined that it would be inadvisable to issue NICA money in the towns of Java and Sumatra, and prohibited their import.

With Japanese still acting as local government in Java and Sumatra, it was necessary for NICA to preserve the value of the Japanese money as much as possible, since it was the only means for them to pay the bills incurred in maintaining order. In many cases, the Japanese were instructed to simply print more money, and the Japanese currency in circulation continued to increase rapidly: the Japanese-originated inflation continued with increased pace. By February 1946, 2 billion Japanese money out of 2.5 billion captured in the state printers, had been spent, a vast sum against the entire pre-war circulation of less than 500 million gulden.

Due to the dwindling supplies of money, destruction of the printing plates at the main printers for re-issue, and disquiet amongst European forces at payment in Japanese money, which was losing value constantly, it was finally decided to issue the NICA gulden in Java on 6 March 1946. Pre-war notes of 5 gulden and below only were to retain validity, and the Japanese money was to be exchanged at a rate of 33 to 1.

This action enraged the Indonesians, who imposed a 5-year prison sentence on its use. One army regiment even went as far as to execute people carrying the money, hoisting their bodies in public with the money pinned onto them.

Due to the difficulties associated with using the money, the supply of food and basic goods from the Republican interior was poor, and the NICA money by June 1946 had fallen to a black market value of just 10 of the Japanese money (which was still the preferred money throughout Java), despite Dutch attempts to enforce the rate.

First notes of the Republic of Indonesia

Although the Republican government was firmly opposed to NICA money, seeing its exclusion as an important tool in the fight with the Dutch, the issue of its own money was slightly more considered.

After their October 2nd proclamation on NICA money, it declared the next day, that Japanese money as well as pre-NICA Dutch money would be legal tender in the Republic, at par. This parity reflected the fact that the Dutch money was no longer backed by gold reserves, the gold having been evacuated in the early part of the war.

The Indonesians had been advised by the British that an issue of Indonesian money would be financial and political suicide, but they had already decided to the contrary. The capture of their printing works and all the money in it by the Allies occurred in January 1946, but the printing plates survived, and with the action of the Dutch in introducing the NICA gulden in Java in March 1946, seen as an offensive act by the Indonesians, there was no impediment to their reprinting and issue. In addition, as with the Dutch, the Indonesians had obtained quantities of Japanese money from the vaults of the banks in the cities they controlled (approximately 600 million Japanese roepiah), and as with the Dutch, the supply was running out.

With only the small Malang printers, formerly of G. Kolff and Company, to print the money, printing of the money took several months, to July 1946.

The Republican government declared that the new central bank of Indonesia would be Bank Negara Indonesia, established on 5th July 1946, occupying the offices of De Javasche Bank in Yogyakarta.

Consequently, the Indonesian rupiah was eventually issued by proclamation of October 3 1946. In the year or so prior, the Japanese money had been a vital conduit of Republican goods to the Dutch enclaves, but the decree bought this to an end: all Japanese money was to be deposited with Republic banks by October 30 1946. Providing the depositors could account for how the money was obtained, they would be entitled to new new 'Oeang Republik Indonesia' (ORI) at the rate of 50 to 1. This policy had been derived from the Dutch geldzuivering of Dutch Minister of Finance Pieter Lieftinck (later Executive Director of the World Bank and IMF), who had trained Sumitro Djojohadikusumo (who had returned to Indonesia along with many other educated Indonesians after the War) in economics at university in The Netherlands. As in The Netherlands, each citizen was to be issued with 1rp to kickstart the circulation of new money. Undeposited money after October was declared worthless. In addition, the new money was said to be worth 0.5 grams of gold, similar to the pre-war Dutch currency, although this was not backed by metal reserves, merely a statement of purchasing power.

Due to a fear that the money would not be returned, there was panic buying of goods in the days following the decree, and prices of food (in Japanese money) soared by up to 30 times, with the blackmarket exchange rate to the NICA gulden rising to 120 to 1.

With the end of Japanese money (in Java only: in Sumatra and nearby Banten, West Java, further from the central government control, the Republic still regarded it as legal tender) as a conduit between the Republican interior and Dutch enclaves, the Dutch were forced to act, ending the exchange of Japanese money on October 30 1946, to avoid a flood of unexchanged Japanese money being brought for exchange with NICA gulden.

Thus as of November 1946, there were only two issues of money in use in Indonesia, the 1943-dated NICA gulden, and the 1945-dated ORI. There was never an official exchange rate between the two currencies, but with popular support for the currency strong, the ORI money was initially worth 5 NICA gulden. The currency, however, depreciated fast, falling to 2 gulden within 1 week, as the market determined the fair rate for the money, and by the end of 1946 to par. By March 1947, it was worth half a gulden, and by July 0.3 gulden. This inflation was caused by the Republican government, which was printing money to meet its obligations in the face of limited income of its own. By January 1947, 310 million rupiah had been printed, half the entire pre-war gulden circulation.

Due to the limited printing capacity of the government, it focused printing on 100 rupiah notes. Limited supply of smaller notes meant that the 100 rupiah notes were worth less than a combination of smaller notes. Rampant forgery only served to exarcebate the inflation of the Indonesian money.

Despite laws put in place to stop hoarding of goods, confidence in the currency could not be maintained. In Jakarta, the Indonesian money was worth even less than elsewhere, as a consequence of the demand for NICA-denominated imported goods. Republican attempts to maintain the value of Indonesian money (which was largely backed by the supply of rice from inner Java) could only slow, rather than stop, its decline.

Dutch money of 1947-1949

New money was issued by the Dutch from July 1947, in the form of fully Dutch/Indonesian bilingual gulden/roepiah notes from 'De Javasche Bank'. These notes were dated 1946, and consisted of 5 (violet), 10 (violet), 25 (red) gulden notes.

The supply of these soon exhausted, and the administration remonetized all of the pre-War DJB and government money as well, circulating unissued paper still stored in the vaults. This caused a 50% increase in the amount of money in circulation from 1947 to 1949. The administration also issued bronze and silver coins in the original pre-war denominations, minted from 1943 to 1945 in the USA, but due to inflation, the coins were worth more as scrap, and many were melted into household goods and silver artefacts. As a result, it issued treasury notes instead, from December 1 1947, in 10 and 25 sen denominations. These notes were successful as they were in Indonesian (with Dutch and Indonesian on the reverse) and stated to have been issued by 'Indonesia' (being NICA), and continued to be utilised by the Indonesian government even after independence, until 1951, when Indonesia acquired its first coins.

Local banknotes of Republic of Indonesia, 1947-1949

As the Republican government never had effective control of Indonesia beyond Java, from 1947 it instructed its regional outposts in Sumatra to issue money to replace the Japanese money from 1947. With the Dutch military action of July 1947 routing the Indonesians in much of Java as well, a smaller number of issues were made in cities of Java.

The notes were marked with the place of issue and were in different designs from the national money.

1949-1958: Recognition of independence, and the new 'Indonesian rupiah'

1950-1952 Indonesian independence recognised. Central bank: De Javasche Bank

In November 1949, the Dutch-Indonesian Round Table Conference held in The Hague, brokered peace and recognition independence for the Indonesian state. As part of the accord, it was provided that The Netherlands was to retain economic influence over the republic until Indonesia had paid the debt run up by NICA in fighting the war with Indonesia. It was agreed that private Dutch-owned De Javasche Bank was to remain as the central bank of Indonesia, despite resentment among Indonesian nationalists. [] .

The Sjafruddin cut

The new "Republik Indonesia Serikat" (with Queen Juliana as head of state) decided to address the amount of money circulating (due to the treaty the government was required to accept the NICA gulden as legal tender as well), which had reached 3.9 billion rupiah. A bewildering variety of money was in circulation, including local and national rupiah, Japanese, pre-war, and NICA Dutch monies.

Due to the large amount of currency, the minister of finance, Sjafruddin Prawiranegara, sought to reduce the money supply by one half. [,9171,805298,00.html] This reform was decreed from 19th March 1950. People were to cut all of their notes of 5 gulden and up in half, with the left half to be replaced with new banknotes, and the right half for a government bond with a 3% coupon. In addition, half of all bank deposits over 400 rupiah were also to be forcibly used to buy the government bonds.

As part of the exchange, local and Republik Indonesia money was also demonetized, with all old Republik Indonesia notes no longer valid after May 1 1950. 125 Rp of the first "Republik Indonesia" rupiah (issued in Java) was exchanged for 1 Rp of new DJB notes. Higher exchange rates were in place for local currencies, some of which had been heavily devalued by the over-printing of money by the army. The recently devalued Rupiah Baru of Aceh were exchangeable at 1.75 to 1.

1959-1965: currency devaluation and spiralling inflation

The economy was ravaged by inflation, and prices had tripled from 1953 to 1959, and Soekarno wanted to devalue the currency. Disagreement over this policy led to the end of Loekman Hakim as Governor Bank Indonesia on 31st July 1959: He was replaced by Soetikno Slamet.

With the unwilling ex-governor replaced, the official exchange rate was devalued on August 1st 1959 by 75% from 11.4 to 45 to the US$ (the unofficial rate, was around half of that, and it had been 3.8 to the dollar in 1949). In addition, the 500 Rp and 1000 Rp notes were devalued 90% on 24th August 1959 to 50 and 100 Rp. The actual notes affected were the '1946' 500 gulden, and the '1952' culture and the 'animal' notes of 500 and 1000rp notes.

The remaining Thomas De La Rue 'animals' notes were issued following the devaluation, with the exception of the 2500 and 5000 rupiah, which was unnecessary thanks to the devaluation. The 2500 rupiah note was eventually issued three years later due to continued high inflation, while the 5000 rupiah was never issued. The 10 and 25 rupiah notes were only circulated for 3 days, although they remained legal tender, and are today extremely rare.

Thus, as of September 1959, the largest note in Indonesia was of 100 rupiah.

1965 onwards - 'new rupiah': the 1000 to 1 revaluation of the rupiah

In response to rampant inflation, which was 27% in 1961, but jumped to 174% in 1962, by 1965 was 600%, during Indonesian political turmoil of 1965, the 'new rupiah' was introduced on 13 December, 1965, at a rate of 1000 of the old unit. [ [] ] The price index at the end of 1965 had been calculated at 363 times higher than in 1958, and prices had risen approximately seven times over the previous 12 months. [cite book
last = McDonald | first = Hamish | title = Suharto's Indonesia | publisher = Fontana Books | date = 1980 | location = Victoria, Australia | pages = page 55 | isbn = ISBN 0-00-635721-0
] In real terms (i.e., with inflation taken into account), a labourer in Jakarta was estimated to have earned 40 per cent of his earnings in 1958. ["Far Eastern Economic Review", 13 February 1965 (cited in cite book
last = McDonald | first = Hamish | title = Suharto's Indonesia | publisher = Fontana Books | date = 1980 | location = Victoria, Australia | pages = page 55 | isbn = ISBN 0-00-635721-0
] Although the devaluation in notes was 1,000 to 1, prices were reckoned to fall by only 10 times. []

This devaluation had the side-effect of unifying the currency, ending the Riau money (the Irian Barat rupiah lasted until 1971). []

1998-1999: post financial crisis banknotes

The Asian financial crisis of 1997-1998 reduced the rupiah's value by over 80% in a few months and was a major factor in the overthrow of President Suharto's government. The rupiah had traded at about 2000-3000 rupiah per 1 USD, but reached a low of 16,800 rupiah per dollar in June 1998. The currency, which had been relatively stable in prior years, had its value destroyed. The government did not take any action to demonetise or revalue the banknotes, "Direksi 1998" merely redesigned the 10,000 and 20,000 rupiah notes.

"Direksi 1999" saw a new Soepratman design for the 50,000 rupiah, replacing the commemorative note of Suharto, who had been deposed after more than 30 years as Indonesia's dictator in the wake of the crisis.

The banknote lineup was extended with a new denomination of 100,000 rupiah in 1999, by then worth about US$12.

500 million notes of the 100,000 rupiah polymer note were printed, to all be issued within a month of November 1999. [] This was part of Indonesia's millennium bug preparations, lest there should be a great demand for cash after the new year. Polymer was chosen because, according to Bank Indonesia, plastic would be harder to counterfeit and would last longer. However, the notes were not popular in banks as counting machines were unable to count them accurately and there have been issues with the money sticking to one another due to the heat of the machine.

2000-2005: redesigns to all of Indonesia's denominations of banknotes

"Direksi 2000" brought a new 1,000 rupiah note, with the 100 and 500 rupiah notes having been discontinued due to the dramatic devaluation of Indonesia's currency.

"Direksi 2001" redesigned the 5,000 rupiah, while "Direksi 2004" brought an end to the polymer 100,000 rupiah notes, replacing with a paper design, as well the issue of a new more secure 20,000 rupiah note.

The most recent changes to Indonesian money were "Direksi 2005", which re-designed the 10,000 and 50,000 rupiah note.

Exchange Rate and inflation

The rupiah has been subject to high inflation for most of its existence (which as an internationally recognised currency should be dated to 1950). Various attempts have been made to maintain the value of the currency, all were abandoned.

1946-1949 revolutionary period

In the period from October 1946 to March 1950 Indonesian currency had no international recognition. Its value was determined on the blackmarket.

1949-1965 foreign exchange restrictions

The exchange rate determined upon independence in 1949 was 3.8 rupiah to one US$. Lembaga Alat-Alat Pembajaran Luar Negeri Publication #26 of March 11 1950 (effective March 13) established the Foreign Exchange Certificate System. [] By the trade in certificates an export rate of 7.6rp and an import rate of 11.4rp was established.

The FECS was scrapped on 4th January 1952, by which time the government had been able to reduce its deficit by 5.3 billion rupiah through the exchange differential. The system was scrapped because domestic prices were being determined by the import rate, which were hurting profits from exports earned at the lower rate. Hence the effective 7.6/11.4rp exchange rate reverted to 3.8rp.

The ending of what amounted to an export tariff severely damaged government revenues, and as of 4th February 1952, the rupiah was officially devalued to 11.4rp, with export tariffs of 15-25% on commodities that Indonesia was strong in. Weaker commodities were not subject to tariffs, and from 1955 were actually given a premium of 5-25% to boost their export.

In order to control foreign exchange, the government brought in a number of measures. 40% of the foreign exchange requirements of importers were required to be paid to the government from April 1952, while as from September 1952 the government decided to provide only a limited amount of foreign exchange, made available every four months. These foreign exchange restrictions, designed to provide the government with much needed reserves meant that some companies were operating at as low as 20% of capacity, due to lack of needed imported materials.

Further foreign exchange restrictions were introduced over 1953-1954, with April 1953, the foreign exchange downpayment was increased to 75%, except for raw materials at 50%. Foreign companies and their workers were placed under restrictions as to the amount of foreign exchange that could be sent home, with the amounts allowed out subject to fees of 66 2/3%. As of November 1954, exporters were required to sell 15% of their foreign exchange earned to the government.

An increasingly complex set of tariffs on imports were unified in September 1955 with a set of Extra Import Duties, requiring downpayments to the government of 50%, 100%, 200%, or 400% of the value of the goods.

The official 11.4 rp rate, which massively overvalued the rupiah, was a major incentive to black market traders, and also contributed to anti-Java feeling, given that those producing raw materials on the large material-rich outer islands were not receiving fair value from their goods due to the exchange rate, diverting funds to the government Java. The black-market rate at the end of 1956 was 31rp, falling to 49rp at the end of 1957, and 90rp by the end of 1958.

In response to Sumatra and Sulawesi refusing to hand over their foreign exchange, in June 1957 a new system for foreign exchange was introduced: exporters received export certificates (BE) representing the foreign currency earned and could sell them to importers on the free market (but subject to a 20% tax). This effectively created a freely floating rupiah. The price of the certificates quickly reached 332% of face by April 1958, i.e. 38rp, a rate at which the government chose to end the free market, fixing the price at 332% of face value.

The currency devaluation of large notes in 1959 saw the official exchange rate devalued to 45rp as of August 1959. Despite this, the fundamental issues with the fixed exchange rate system and severe import controls (which saw cotton mills running at only 11% of capacity due to lack of imported raw materials) were not addressed, and smuggling grew, often backed by the army, while assets were moved offshore by overinvoicing.

The government maintained price controls over goods and raw materials, with the official oil price unchanged 1950-1965.

After the 1959 devaluation, inflation, which had been running at a relatively high 25% per annum 1953-1959 really took off, with rates over 100% in 1962, 1963, and 1964, and 600% in 1965. Despite the official 45rp to 1 US$ rate, two further export certificate trading systems, of March 1962 - May 1963, and then from April 1964 onwards, showed premiums of 2,678% July 1962 (1205rp effective rate), 5,100% August 1965 (2295rp) and 11,100% in November 1965 (4995rp). []

1966-1971 stabilization and growth

The last demonetization of rupiah notes occurred in late 1965, at which time inflation was ravaging the economy: exports had dropped 24% 1959-1965, GDP growth was below population growth, and the foreign exchange reserves had fallen by over 90%. Inflation in 1965 was 635%. In late 1965, the 'new rupiah' was brought in, at 1000 to 1 to the old currency. The official exchange rate was set initially at 0.25rp to 1 US$ as of 13 December 1965, a rate that did not represent reality, as the multiple exchange rate system remained in place for the time being.

This was followed by the emergence of Suharto, who as of 11 March 1966 acquired executive control of Indonesia.

Suharto quickly made economic changes, establishing his 'New Order', with economic policy set by the Berkeley Mafia, his team of US-educated neoclassical economists. The policy began to be set out in November 1966, following the reaching of agreement with Indonesia's creditors in October 1966 on debt relief and loan restructuring. Economic policies were put in place to require adequate bank reserves, ending subsidies on consumer goods, end import restrictions, and to devalue the rupiah.

The 1966-1970 stabilization program was a great success, resulting in higher economic growth, boosting legal exports (which grew 70% in US$ terms over the period), and increasing output (for instance the price of oil rose 250 times when the 1950 prices were abandoned, incentivising new exploration). By 1971 inflation had fallen to just 2%.

Despite the liberalisation efforts, Indonesia still had multiple exchange rates. A more realistic exchange rate was finally established of 378 (new) rupiah to 1 US$ as of April 1970. In August 1971 the exchange rate was devalued slightly, to 415rp to the US$.

Fixed rate period 1971-1978

The 415 rupiah exchange rate to the US dollar, which had been established in August 1971 was fixed by government intervention in the currency market, buying and selling currency as needed. []

Despite the fixed rate, the failure of the rice crop in 1972, exarcebated by high world rice prices, and underordering by the government rice cartel, along with rising commodity prices caused inflation to rise above 20% in 1972, peaking at over 40% in 1974. The M1 money supply increased sharply over the period due to lax credit controls, which was channeled towards favoured groups, such as pribumi (non-Chinese Indonesians), as well as corrupt government-linked businesses. []

Despite the high inflation of the period, the exchange rate, which had essentially been preserved using the country's oil exports, was maintained at 415 rupiah until 15th November 1978.

Managed Float period 1978-1997

1978-1986 devaluations

By 1978, the combination of a fall in oil prices and a decrease in foreign reserves meant that the rupiah was devalued 33% to 625rp to 1 US$ on 16th November 1978 (although prices had increased nearly fourfold over the period.

The government abandoned the fixed exchange rate, and altered economic policy to a form of a managed float. The exchange rate was published each day. At the point of devaluation (November 1978), the trade-weighted real (local price adjusted) effective exchange rate (REER) of the rupiah [] against major world currencies was just over twice as high as it was in 1995 (prior to the Asian economic crisis, and free fall of the rupiah), i.e. the rupiah was highly overvalued at this point. By March 1983, the managed float had brought only an 11% fall in three and a half years to 702rp.

The continued overvaluation of the rupiah meant that Indonesia was beginning to suffering a trade deficit, as well as falling foreign exchange reserves. The government responded by devaluing the currency on 30th March by 28% to 970rp.

At this time the 1980s oil glut put the Indonesian economy was under pressure, with exports uncompetitive as a result of the overvalued currency, and oil contributing less as a result of lower global prices. On 1 June 1983, 'Pakjun 1983' brought deregulation of the banking system, and the end of the meaningless 6% official deposit rate, with a more market-based financial system. Credit ceilings were removed. Interest rates, initially 18%, remained above 15% over the period.

By September 1986 the currency had been allowed to steadily fall to 1134 rupiah, a rate which had largely maintained purchasing power over the period. Despite this, the currency was devalued 30% on 12 September 1986 to 1664 rupiah to 1 US$. As in 1983, this had been intended to boost the balance of trade: oil prices, $29 in 1983, fell by 50% in 1986 alone, to below $9 per barrel.

Thus in the period from 1978 to 1986, the real exchange rate of the Indonesian rupiah fell by more than 50%, providing significant boosts to the competitivity of Indonesia's exports.

October 1986-June 1997: US$ real exchange parity

Although the devaluations of 1978, 1983 and 1986 had each successfully boosted the competitiveness of exports, devaluations have a destabilizing effect, and the September 1986 devaluation was the last carried out by Indonesia.

According to research [] , despite an official 7-basket currency, empirical evidence suggests that the rupiah was controlled by Bank Indonesia against the US$ alone, and indeed since the 1986 devaluation, the currency maintained near-constant purchasing power against the dollar up until the 1997 crisis, the steady fall of the rupiah against the dollar essentially representing the delta of Indonesian inflation above US inflation; hence, by June 1997 the rupiah had fallen from its post-devaluation rate of 1664rp to 2350rp, an annualized decline of slightly over 3%.

Asian Financial Crisis (and response) 1997-1999

First stage of the crisis - limited initial falls

The Asian Financial Crisis of 1997 began in Thailand, where the Thai Baht, fixed at 25 THB to 1 USD, came under attack in May 1997. By 2 July 1997 Thailand abandoned its defence of the baht, allowing it to float freely.

Indonesia, which had massive foreign reserves and was seen as having a strong economy, responded on July 11 1997, by widening its exchange rate band from 8 to 12%. Indonesia had taken similar actions previously, in December 1995 from 2 to 3%, in response to the Mexican financial crisis, and in June and September 1996 from 3 to 5% and then 5 to 8%. These actions had been successful in the past in defending the rupiah, but on this occasion there was a more serious crisis of confidence.

The rupiah fell 7% immediately, with foreign money quick to leave the country, with investor confidence in Indonesia shaken (due to previous deregulations, much of the Indonesian stockmarket was owned by foreign investors). Local confidence in the currency was also undermined as the population decided to follow suit, selling rupiah for dollars.

The spot rate soon fell below the selling rate (i.e. outside the 12% exchange rate band), and despite Bank Indonesia's attempts to intervene, it soon abandoned the managed float, leaving the rupiah to float freely on August 14th 1997.

The rate, 2436 on July 11th, was 2663 on August 14th, and 2955 on August 15th: a 12% fall. Government debt (Bank Indonesia Certificates or SBI) rose from 12% to 30%, and overnight call rates reached 81% (per annum).

Response to the falls - crisis

At this stage the crisis was a limited one: while the currency had fallen, the extent of the fall did not look to be catastrophic. The government announced its response in September: the banking sector was to be restructured, government projects would be cancelled, and some banks were supported with liquidity from the government.

The government reduced the SBI rate three times in September to around 20%. As of 24th September, the exchange rate still lingered around 3000, at 2990.

The government response to the crisis sent mixed messages, with falling interest rates doing nothing to support confidence in the rupiah, and the rupiah continued to be sold, as companies who had been borrowing heavily in dollars had to meet their obligation. By October 4th, the rupiah had collapsed a further 19%, falling to 3690 rupiah. The rupiah had now lost a third of its value, and there was now a full-blown 'krisis' in Indonesia.

On 8th October with the rupiah at 3640, the government decided to seek the support of the IMF. The rupiah fluctuated in the 3300-3650 range during October awaiting the IMF's response.

The response was announced on 1st November 1997. Sixteen small and insolvent banks would be closed, with a small market share of only 2.5%. Deposits would be underwritten up to 20 million rupiah (90% of all depositors had less than this in the bank). Private banks would be subject to improved monitoring, and some state banks would be merged.

The rupiah immediately gained almost 10% against the dollar, to around 3300, as the markets signalled their approval.

Soon after, however, confidence began to fall. The IMF response had only been published in summary form from the government and Bank Indonesia, and the choice of the sixteen banks being closed appeared arbitrary, and the details of the thirty-four others subject to special measures was not announced.

The deposit guarantee of 20 million rupiah was seen as inadequate, and funds were moved from private to state banks, exchanged for dollars, or transferred offshore, as confidence in the plan began to evaporate.

The rupiah steadily weakened from the middle of November, standing at 3700 rupiah at the end of the month. In December the crisis turned into a disaster. Much of the Indonesian economy was controlled (indeed, in 2008, much of it still is) by relatives of the President Suharto, and of the sixteen banks to be liquidated, PT Bank Andromeda was 25% owned by Bambang Trihatmodjo, the second son of Suharto, PT Bank Jakarta was part-owned by Probosutedjo, the President's half-brother, and PT Bank Industri was 8% owned by the President's second daughter, Siti Hediati Prabowo. []

The President and his family were opposed to the reforms, with Bambang Trihatmodjo beginning legal action against the government to keep his bank, particularly as directors of the insolvent banks were, if culpable, to be added to a Disgraced Persons List, ineligible to work in the banking sector. Although the bank had violated its BMPK (credit limit), Bambang was given permission by Bank Indonesia to buy Bank Alfa, another bank, seen by many as a reward for withdrawing his lawsuit. In effect, the failed bank was reopened under a different name.

It was clear that the cronyism and corruption of Indonesia was winning over IMF reforms. The rupiah fell from 4085 to 5650 in the space of a single week. By the middle of the month, half the banking system, 154 banks, had suffered bank runs. By Christmas Eve the rupiah stood at 5915: a fall of 60% since July.

The New Year saw the rupiah begin at 5447. On January 15th a second Letter of Intent was signed with the IMF, agreeing an accelerated reform package in return for $43 billion of aid. The rupiah had strengthened from an all-time low of 9100 on January 12th to 7225 on the 15th of January, but it soon became clear Suharto had no intention of fulfilling the agreement. The rupiah plummeted by more than 50%, bottoming out at 14800 on January 23rd. The amount of liquidity pumped into the banking system was by now over 60 trillion rupiah, causing money supply increases and worsening inflation.

The government announced a rescue package on 26th January, [] ensuring that the government would guarantee all existing deposits. The Indonesian Bank Restructuring Agency was setup with the goal of merging, closing, or recapitalising (before sale) banks.

Fifty-four banks (four state, fifty private), representing nearly 40% of the sector were placed under IBRA supervision in February 1998, with a resulting strengthening of the rupiah to 7400.

Despite the improvements, it was not long before confidence was undermined again, as Suharto discussed a currency board, the IBRA head was replaced, and political instability increased. The currency fell to around 10000.

Indonesia began to take more drastic action, doubling its SBI rates to 45% (increasing the cost of its lending), and in April, having signed a third Letter of Intent with the IMF, the IBRA took over the major private banks, twinning the banks with state banks, and suspending the owners' control. The rupiah, which had strengthened to around 8000, depreciated in the wake of the Jakarta riots of May 1998, and in particular the run on the Bank of Central Asia, Indonesia's largest private bank that ensued, causing the bank to be taken over by IBRA on 29th of May. The SBI rate was increased to 70% in the wake of massive inflation.

The end of Suharto's rule brought a new President, Jusuf Habibie, to power on 21st May 1998. Little action was seen immediately, and by 17th June the rupiah had bottomed out at 16800 rupiah.

A fourth Letter of Intent was signed with the IMF, on June 25 1998, which was refusing to provide aid due to breaches of its original agreement. The IMF agreed to provide an immediate $5 billion of aid to cover basic necessities.

Audits of the banks that had been taken over showed massive bad debts, exceeding 55%. Further audits showed that the other banks were also fundamentally weak. Banking reform continued through to 1999, with the merger of 4 state banks in October 1998, into Bank Mandiri, the closure of 38 banks in March 1999, recapitalisation of 9, and take over of 7 more. By this point total bank capital had reached NEGATIVE 245 trillion rupiah. 23 further banks were recapitalised in May, and in October 1999 Bank Mandiri itself was recapitalised. Interest rates fell steadily in 1999, to an SBI of 13.1% in October. The rupiah finished the year at 7900 to the US Dollar.

Despite the fall of the currency of about 70% from June 1997 to December 1998, inflation of 60-70% (which caused riots, and the end of the Suharto regime after 30 years in power) in 1998 meant that the real exchange rate fell only slightly.

Rupiah since 1999: relative stability

In 2000, the exchange rate between rupiah and United States dollars decreased to around 9000 rupiah to one United States dollar. From the years 2000 to 2008, the exchange rate has generally been between 8,000 and 11,000 rupiah to one United States dollar. [ Indonesian Rupiah Rates Charts] . "Saxo Bank". Forex. Retrieved 2008-06-13.] Unlike many Western currencies, it did not gain in strength against the United States dollar between 2006 and 2008, hence it depreciated against non-United States currencies over this time.

The catastrophic damage to the rupiah caused in 1997-1998 severely damaged confidence in the currency. Even though the rupiah is freely convertible currency, it is still regarded as a risky currency to hold. Within Indonesia, the preferred currency for exchange is the United States dollar. Other currencies are typically subject to a wide exchange spread. As of June 2008, one United States dollar is worth approximately 9,300 Indonesian rupiah.

ee also

* Netherlands Indian gulden
* Netherlands Indian roepiah
* West New Guinean gulden
* West New Guinean rupiah
* Riau rupiah
* Economy of Indonesia


* Cribb, Robert, ‘Political dimensions of the currency question 1945-1947’, "Indonesia" 31 (April 1981), pp. 113-136. []
* cite book
title = Katalog Uang Kertas Indonesia 1782 - 2005
publisher = P.T. Sugiya Abadi Sentosa
year = 2005

External links

Standard numismatics external links
world_coin_gallery_1_url = Indonesia
world_coin_gallery_1_name = Indonesia
banknote_world_1_url = Indonesia
banknote_world_1_name = Indonesia
dollarization_1_url = asia
dollarization_1_name = Asia
gfd_1_url = Indonesia
gfd_1_name = Indonesia
gfd_data_1_url = 5523
gfd_data_1_name = Indonesia Rupiah
show_gfd_excel = Y

* [ Will's Online World Paper Money Gallery] Images and information on banknotes from around the world, including a nice section with information and images of both current and historic Indonesian banknotes
* [ Daily Rupiah exchange rates from other currencies] (Bank Indonesia rates)
* [ Polymer Notes - Indonesia]
* [ Indonesian Government Security Printing and Minting Corp.] (PERURI)
* [ Identifying the authenticity of Rupiah banknotes and coins] (Bank Indonesia)
* [ Information on Rupiah] (

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