Indonesian rupiah
The rupiah is the official currency
In economics, currency refers to a generally accepted medium of exchange. These are usually the coins and banknotes of a particular government, which comprise the physical aspects of a nation's money supply...

 of Indonesia
Indonesia , officially the Republic of Indonesia , is a country in Southeast Asia and Oceania. Indonesia is an archipelago comprising approximately 13,000 islands. It has 33 provinces with over 238 million people, and is the world's fourth most populous country. Indonesia is a republic, with an...

. Issued and controlled by the Bank of Indonesia
Bank Indonesia
Bank Indonesia is the central bank of The Republic of Indonesia. Bank Indonesia is currently governed by Darmin Nasution, former interim governor. The last governor before the interim phase, Boediono, resigned due to his vice presidential candidacy in the Indonesian presidential election...

, the ISO 4217
ISO 4217
ISO 4217 is a standard published by the International Standards Organization, which delineates currency designators, country codes , and references to minor units in three tables:* Table A.1 – Current currency & funds code list...

 currency code for the Indonesian rupiah is IDR. Informally, Indonesians also use the word "perak" ('silver' in Indonesian
Indonesian language
Indonesian is the official language of Indonesia. Indonesian is a normative form of the Riau Islands dialect of Malay, an Austronesian language which has been used as a lingua franca in the Indonesian archipelago for centuries....

) in referring to rupiah. The rupiah is subdivided into 100 sen
Cent (currency)
In many national currencies, the cent is a monetary unit that equals 1⁄100 of the basic monetary unit. Etymologically, the word cent derives from the Latin word "centum" meaning hundred. Cent also refers to a coin which is worth one cent....

, although inflation has rendered all coins and banknotes denominated in sen obsolete.

The Riau islands and the Indonesian half of New Guinea
New Guinea
New Guinea is the world's second largest island, after Greenland, covering a land area of 786,000 km2. Located in the southwest Pacific Ocean, it lies geographically to the east of the Malay Archipelago, with which it is sometimes included as part of a greater Indo-Australian Archipelago...

 (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
Riau rupiah
The rupiah was a distinct currency of Riau between 1963 and 1964. It replaced the Malaya and British Borneo dollar at par and was replaced by the Indonesian rupiah at the rate of 1 Riau rupiah = 14.7 Indonesian rupiah.-History:...

 and West New Guinea rupiah).

Current legal tender

The current rupiah consists of coins from 25 rupiah up to 1000 rupiah (1 rupiah are officially legal tender but are effectively worthless and are not circulated), and from banknotes of 1000 rupiah up to 100,000 rupiah. With US$1 generally worth about 9,000 rupiah (since November 2011), the largest Indonesian banknote is therefore worth approximately US$11.10.


There are presently two series of coins in circulation: aluminium bronze and bi-metallic coins from 1991–1998 and light-weight aluminium coins from 1999 onwards. Due to the low value and general shortage of small denomination coins (below 100 rupiah), it is common to have amounts rounded up (or down) or to receive sweets in lieu of the last few rupiah of change in supermarkets and stores.
Indonesian rupiah coins
Image Value Series Diameter Thickness Weight Material Obverse Reverse Availability
Obverse Reverse
Rp 50 1999 20 mm 2 mm 1.36 g Aluminium Garuda Pancasila  Kepodang Bird and coin value Medium
Rp 100 1999 23 mm 2 mm 1.79 g Palm Cockatoo
Palm Cockatoo
The Palm Cockatoo , also known as the Goliath Cockatoo, is a large smoky-grey or black parrot of the cockatoo family. It is the only member in subfamily Microglossinae and the only member of the monotypic genus, Probosciger...

 Bird and coin value
Rp 200 2003 25 mm 2.3 mm 2.38 g Bali Starling
Bali Starling
The Bali Starling , also known as Rothschild’s Mynah, Bali Myna, or Bali Mynah, locally known as Jalak Bali, is a medium-sized , stocky myna, almost wholly white with a long, drooping crest, and black tips on the wings and tail. The bird has blue bare skin around the eyes, greyish legs and a yellow...

 Bird and coin value
| Rp 500 1991 24 mm 1.8 mm 5.29 g Aluminium Bronze Jasmine Flower and coin value Low
| 1997 1.83 mm 5.34 g Medium
| 2003 27 mm 2.5 mm 3.1 g Aluminium High
| Rp 1,000 1993 26 mm 2 mm 8.6 g Bi-metal
Bi-metallic coins
Bi-metallic coins are coins consisting of more than one metal or alloy, generally arranged with an outer ring around a contrasting center. Common circulating examples include the €1, €2, British £2, Canadian $2, South African R5, Turkish 1 lira, and all Mexican coins of $1 or higher...

, nickel and aluminium bronze
Palm Tree and coin value Low
| 2010 24.15 mm 1.6 mm 4.5 g Nickel
Nickel is a chemical element with the chemical symbol Ni and atomic number 28. It is a silvery-white lustrous metal with a slight golden tinge. Nickel belongs to the transition metals and is hard and ductile...

 plated steel
Steel is an alloy that consists mostly of iron and has a carbon content between 0.2% and 2.1% by weight, depending on the grade. Carbon is the most common alloying material for iron, but various other alloying elements are used, such as manganese, chromium, vanadium, and tungsten...

Garuda Pancasila and coin value Angklung
The Angklung is a musical instrument made of two bamboo tubes attached to a bamboo frame. The tubes are carved to have a resonant pitch when struck and are tuned to octaves. The base of the frame is held in one hand, whilst the other hand shakes the instrument rapidly. This causes a repeating note...

 and Gedung Sate
Gedung Sate
Gedung Sate, is a neo-classical building mixed with native elements that now serves as the governor's office of the West Java province in Indonesia. Located in Bandung, the building was designed by a Dutch architect J...

High (mintage 719 million)


Currently circulating Indonesian banknotes date from 2000 (1000 rupiah), 2001 (5000 rupiah), 2004 (20000 and 50000) rupiah, 2005 (10000 and 100000 rupiah), 2009 (the new 2000 rupiah), and 2010 (revised version of the 10000) rupiah. The 1998–1999 notes have no longer been legal tender since 31 January 2008 (but will be exchangeable until 31 January 2018 at Bank Indonesia). Earlier notes are also no longer legal tender, due to the lack of security features and association with the Suharto regime, but could be exchanged in Bank Indonesia offices until August 20, 2010.

As the smallest current note is worth approximately US$
United States dollar
The United States dollar , also referred to as the American dollar, is the official currency of the United States of America. It is divided into 100 smaller units called cents or pennies....

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 initially announced that this would change, with a 2000 rupiah note to replace the 1000 rupiah, with that denomination replaced by a coin. After a long delay, this proposal was revised so that the 2000 rupiah banknotes was launched by BI (Bank Indonesia
Bank Indonesia
Bank Indonesia is the central bank of The Republic of Indonesia. Bank Indonesia is currently governed by Darmin Nasution, former interim governor. The last governor before the interim phase, Boediono, resigned due to his vice presidential candidacy in the Indonesian presidential election...

) on 9 July 2009, with the banknotes circulating as legal tender from 10 July 2009, but without withdrawing the 1000 rupiah note.

Due to the low value of the (older series) 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 market money), outside the banking system for use in informal transactions.
Rupiah notes '2000'—'2010' series
Image Value Main Colour Description Date of issue
Obverse Reverse Obverse Reverse
Rp1,000 Blue and green Captain Pattimura
Thomas Matulessy, , also known as Kapitan Pattimura or simply Pattimura, was a Christian Ambonese soldier who led a rebellion against Dutch forces on Saparua near Ambon in Maluku....

Maitara and Tidore
Tidore is a city, island, and archipelago in the Maluku Islands of eastern Indonesia, west of the larger island of Halmahera. In the pre-colonial era, the kingdom of Tidore was a major regional political and economic power, and a fierce rival of nearby Ternate, just to the north.-Geography:Tidor...

 Islands, with fishermen on a boat
November 29, 2000
Rp2,000 Grey Antasari, Prince of Banjar Dayak
Dayak people
The Dayak or Dyak are the native people of Borneo. It is a loose term for over 200 riverine and hill-dwelling ethnic subgroups, located principally in the interior of Borneo, each with its own dialect, customs, laws, territory and culture, although common distinguishing traits are readily...

 dancers (South Borneo
Borneo is the third largest island in the world and is located north of Java Island, Indonesia, at the geographic centre of Maritime Southeast Asia....

July 9, 2009
Rp5,000 Brown and green Tuanku Imam Bonjol
Tuanku Imam Bonjol
Tuanku Imam Bonjol , also known as Muhammad Syahab, Peto Syarif, and Malim Basa, was a hero in the Indonesian struggle against Dutch rule. He was born in the village of Tanjung Bunga in the Pasaman regency of West Sumatra. His father's name was Buya Nudin...

Songket is a fabric that belongs to the brocade family of textiles of Indonesia, Malaysia, and Brunei. It is hand-woven in silk or cotton, and intricately patterned with gold or silver threads. The metallic threads stand out against the background cloth to create a shimmering effect...

 weaver, Tanah Datar
Tanah Datar
Tanah Datar is a regency in West Sumatra province, Indonesia. The regency has a population of 334,000. The capital of the regency is Batusangkar...

November 6, 2001
Rp10,000 Red-Purple Sultan Mahmud Badaruddin II The traditional Limas House of Palembang
Palembang is the capital city of the South Sumatra province in Indonesia. Palembang is one of the oldest cities in Indonesia, and has a history of being a capital of a maritime empire. Located on the Musi River banks on the east coast of southern Sumatra island, it has an area of 400.61 square...

, South Sumatra
South Sumatra
South Sumatra is a province of Indonesia.-Geography:It is on the island of Sumatra, and borders the provinces of Lampung to the south, Bengkulu to the west, and Jambi to the north...

October 18, 2005
Rp10,000 Blue-Purple July 20, 2010
Rp20,000 Green Oto Iskandar di Nata
Oto Iskandar di Nata
Raden Oto Iskandar di Nata, also spelled Iskandardinata, was a fighter for Indonesia's liberation from Dutch rule. He is considered a national hero. For a short time, he was State Minister, before he was abducted and assasinated in mauk tangerang banten....

Tea plantation, West Java
West Java
West Java , with a population of over 43 million, is the most populous and most densely populated province of Indonesia. Located on the island of Java, it is slightly smaller in area than densely populated Taiwan, but with nearly double the population...

December 29, 2004
Rp50,000 Blue I Gusti Ngurah Rai
I Gusti Ngurah Rai
Lieutenant Colonel I Gusti Ngurah Rai is an Indonesian National Hero who commanded Indonesian forces in Bali against the Dutch during the Indonesian War of Independence...

Pura Ulun Danu Bratan
Pura Ulun Danu Bratan
Pura Ulun Danu Bratan, or Pura Bratan, is a major Shivaite & water temple on Bali, Indonesia — the other major water temple being Pura Ulun Danu Batur. The temple complex is located on the shores of Lake Bratan in the mountains near Bedugul...

, Bali
Bali is an Indonesian island located in the westernmost end of the Lesser Sunda Islands, lying between Java to the west and Lombok to the east...

October 18, 2005
Rp100,000 Red Sukarno
Sukarno, born Kusno Sosrodihardjo was the first President of Indonesia.Sukarno was the leader of his country's struggle for independence from the Netherlands and was Indonesia's first President from 1945 to 1967...

 and Hatta
Mohammad Hatta
was born in Bukittinggi, West Sumatra, Dutch East Indies . He was Indonesia's first vice president, later also serving as the country's Prime Minister. Known as "The Proclamator", he and a number of Indonesians, including the first president of Indonesia, Sukarno, fought for the independence of...

DPR/MPR Building
DPR/MPR Building
The DPR/MPR Building is the seat of government for the Indonesian legislative, which comprises the People's Consultative Assembly the People's Representative Council and the Regional Representatives Council .-History:...

December 29, 2004

Security 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
    Abacá, Musa textilis is a species of banana native to the Philippines, grown as a commercial crop in the Philippines, Ecuador, and Costa Rica. The plant is of great economic importance, being harvested for its fibre, once generally called Manila hemp, extracted from the trunk or pseudostem. On...

     fibre, which is naturally plentiful in Indonesia and is believed to increase the durability of the banknotes. The banknotes are made with the process of heating, to create a unique type of pulp
    Wood pulp
    Pulp is a lignocellulosic fibrous material prepared by chemically or mechanically separating cellulose fibres from wood, fibre crops or waste paper. Wood pulp is the most common raw material in papermaking.-History:...

  • 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
      Horizontal plane
      In geometry, physics, astronomy, geography, and related sciences, a plane is said to be horizontal at a given point if it is perpendicular to the gradient of the gravity field at that point— in other words, if apparent gravity makes a plumb bob hang perpendicular to the plane at that point.In...

       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.
    • Intaglio Printing are put in the denomination numbers in the banknote,to make the blind people recognize the real money.

  • The 2010 10,000 rupiah introduced several new security features: use of EURion constellation
    EURion constellation
    The EURion constellation is a pattern of symbols found on a number of banknote designs worldwide since about 1996. It is added to help software detect the presence of a banknote in a digital image. Such software can then block the user from reproducing banknotes to prevent counterfeiting using...

     rings, rainbow printing designed to change colour when viewed from different angles.

800–1942 – Javanese, Chinese, Dutch colonial money

The first coin-like products found in Indonesia date from the ninth Century Buddhist Sailendra
Sailendra is the name of an influential Indonesian dynasty that emerged in 8th century Java.The Sailendras were active promoters of Mahayana Buddhism and covered the Kedu Plain of Central Java with Buddhist monuments, including the world famous Borobudur.The Sailendras are considered to be a...

 dynasty, and were produced in Indonesia until the twelfth century, gold and silver massa (emas is the modern Indonesian word for 'gold') and kupang. Also used in this period were 'Mutisalah', strings of beads of Indo-Pacific origins, produced by the Sumatran Srivajaya empire, which spread to Borneo, Java, and to the eastern Indonesian islands in the 13th century. While the eastern islands continued to preserve the beads as heirlooms until the present day, using Chinese-made beads after the defeat of Srivajaya. The Majapahit empire, which became predominant in Java and Sumatra from the late 13th Century, received with the arrival of Chinese traders, holed copper coins known as cash
In common language cash refers to money in the physical form of currency, such as banknotes and coins.In bookkeeping and finance, cash refers to current assets comprising currency or currency equivalents that can be accessed immediately or near-immediately...

. These were later mimicked in Indonesia using tin or lead.

When Europeans began arriving in Indonesia, they brought with them gold coins from Portugal and Venice, and silver Spanish dollar
Spanish dollar
The Spanish dollar is a silver coin, of approximately 38 mm diameter, worth eight reales, that was minted in the Spanish Empire after a Spanish currency reform in 1497. Its purpose was to correspond to the German thaler...

s from Mexico, Peru and Bolivia, the latter becoming the predominant trade coin
Trade coin
Trade coins are coins minted by a government, but not necessarily current within the territory of the issuing country. These quasi bullion coins were thus actually export goods - that is, bullion in the form of coins, used to bulk buy important goods from other countries, where they could be...

 in the archipelago for several hundred years. The Dutch East India Company
Dutch East India Company
The Dutch East India Company was a chartered company established in 1602, when the States-General of the Netherlands granted it a 21-year monopoly to carry out colonial activities in Asia...

 was granted a trade monopoly over the Indies in 1600, and under the leadership of Jan Pieterszoon Coen
Jan Pieterszoon Coen
Jan Pieterszoon Coen was a officer of the Dutch East India Company in the early seventeenth century, holding two terms as its Governor-General of the Dutch East Indies....

, gained effective government over the territory around Batavia on Java, their capital, with an area of influence that increased over time, and which was eventually expanded by Dutch conquest into the 20th Century to include nearly all of what is now Indonesia.

The Dutch East India Company in the 17th century imported chiefly silver coin, in the form of Dutch small silver 1, 2, and 6 stuiver coins, as well as the Spanish dollar (the most popular trade coin) and Dutch trade coinage. They helped provide smaller change by selling tin to the cash mints, but generally did not produce or import it themselves.

Due to a lack of tin supply, in 1724 the Company began to produce its own copper coins, 'VOC'-branded duit
The duit was a Dutch coin worth 2 penning, with 4 duit equal to one stuiver and 80 duit equal to one gulden. It was once used in the Americas while under Dutch rule....

 coins, which were minted in six provinces of The Netherlands, and imported in vast numbers over the 18th and into the 19th century. There were intermittent efforts at VOC-branded silver coinage, but mostly imported Dutch and Spanish silver, which had a higher value in the Indies, was used. Although most coin was imported, (chiefly) silver and also some gold 'rupee' coins were minted locally in the 18th and early 19th century.

The first bank paper appeared with the formation of the De Bank Courant en Bank van Leening in 1752, and a number of issues were made over the next sixty years, which all tended to lose value over time due to lack of coin to back the paper.

The VOC went bankrupt in 1800 and the territories were nationalised by the then government, the Batavian Republic
Batavian Republic
The Batavian Republic was the successor of the Republic of the United Netherlands. It was proclaimed on January 19, 1795, and ended on June 5, 1806, with the accession of Louis Bonaparte to the throne of the Kingdom of Holland....

, which issued its own duits and made an issue of silver gulden coins in 1802. Duits were minted in large numbers in Surabaya
Surabaya is Indonesia's second-largest city with a population of over 2.7 million , and the capital of the province of East Java...

 between 1814 and 1840, with silver imported from the Netherlands. In 1854, the Netherlands Indies Guilder/Gulden
Netherlands Indian gulden
The gulden was the unit of account of the Dutch East Indies from 1602 under the United East India Company , following Dutch practice first adopted in the 15th century . A variety of Dutch, Spanish and Asian coins were in official and common usage...

 was decimalised, the duit replaced by the cent, and a series of coins from 1/2 cent up to 1/4 gulden was issued, all of which were minted in The Netherlands. Larger denominations – 1/2, 1 and 2½ gulden in silver, and 5 and 10 gulden in gold were of regular Dutch issue, and circulated alongside the lower denominated Indies coinage. This same series of coinage continued to be issued until independence in 1945.

The government put a stop to the inflationary bank paper with an issue of government paper in 1815, withdrawn on June 30, 1861. De Javasche Bank, the central bank of the Netherlands Indies, eventually to become Bank Indonesia
Bank Indonesia
Bank Indonesia is the central bank of The Republic of Indonesia. Bank Indonesia is currently governed by Darmin Nasution, former interim governor. The last governor before the interim phase, Boediono, resigned due to his vice presidential candidacy in the Indonesian presidential election...

, was established in 1828, subject to much stricter regulation than previous banks, and remained solvent.

1942–1949 Japanese invasion, and Indonesian independence – the dawn of hyperinflation in Indonesia

The Japanese invasion

In 1942, the Japanese invaded the Netherlands Indies
Japanese Occupation of Indonesia
The Japanese Empire occupied Indonesia, known then as the Dutch East Indies, during World War II from March 1942 until after the end of War in 1945...

, 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
Netherlands Indian gulden
The gulden was the unit of account of the Dutch East Indies from 1602 under the United East India Company , following Dutch practice first adopted in the 15th century . A variety of Dutch, Spanish and Asian coins were in official and common usage...

. 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 on August 14, 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 10 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.

The first Indonesian rupiah – in Java

Although the Republican government was firmly opposed to the use of the Dutch 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 2 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, with both holding the same value, despite the greatly inflated quantity of Japanese money circulating, reflecting in part 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 their resolve was firm. Their first notes, dated 1945, were in preparation when the Indonesian printing works and all the money in it was seized by the Allies (which at this point included in the British, tasked with restoring order) in their successful assault on Jakarta in January 1946.

The printing plates survived the attack, and with the Dutch decision to finally introduce the NICA gulden to Java in March 1946 seen as an offensive act, the Indonesians pressed ahead with the reprinting, an act spurred, as with the Dutch, by the dwindling supplies of Japanese money from the vaults of the banks in the cities they controlled (approximately 600 million Japanese roepiah).

With Indonesian resources increasingly poorly matched against the Dutch, and only the small G. Kolff & Co Malang
Malang is the second largest city in East Java province, Indonesia. It has an ancient history dating back to the Mataram Kingdom. The city population at the 2010 Census was 819,708. During the period of Dutch colonization, it was a popular destination for European residents. The city is famous for...

 printers at their disposal 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
Bank Negara Indonesia
Bank Negara Indonesia , commonly known as BNI, is an Indonesian bank. It branches primarily in Indonesia, but it can also found in Singapore, Hong Kong, Tokyo, London and New York. It had 1,000 branches and 9 million customers in 2006. It is quoted on the Indonesia Stock Exchange as...

, established on 5 July 1946, occupying the offices of De Javasche Bank in Yogyakarta, the stronghold of the republic.

Consequently, the Indonesian rupiah was finally first 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 Japanese rupiah to 1 rp ORI. Outstanding debts were revalued according to their date of origin, with debts arising prior to 1943 (before the Japanese-induced inflation) converted at par, debts from 1943–1945 at 20 to 1, and those arising that year at the same 50 to 1 ratio.

This deflationary policy had been derived from the Dutch geldzuivering of Dutch Minister of Finance Pieter Lieftinck (later Executive Director of the World Bank and International Monetary Fund
International Monetary Fund
The International Monetary Fund is an organization of 187 countries, working to foster global monetary cooperation, secure financial stability, facilitate international trade, promote high employment and sustainable economic growth, and reduce poverty around the world...

 (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 1 rp to kick-start the circulation of new money. Undeposited money after October was declared worthless.

One rupiah of the new money was said to be worth 0.5 grams of gold, a similar rate to the pre-war Dutch currency (which contained 3 grams of fine gold in the 5 gulden and 6 in the 10 gulden coin), although this was not backed by metal reserves, merely a proclamation of purchasing power.

Due to a fear that the deposited 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 black market exchange rate to the NICA gulden rising to 120 to 1.

With the end of Japanese money in the main Republican stronghold in Java 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 in Java at this point two currencies circulated, the 1943-dated Dutch NICA gulden, in Dutch-controlled areas, and the 1945-dated ORI in the Indonesian enclaves.

The Indonesian resistance was highly fragmented, strongest in rural villages, and lacking the ability to supply money across its extent, the Japanese money continued to be used in Banten, West Java, as well as all of republican Sumatra.

There was never an official exchange rate between NICA gulden and Indonesian rupiah, but with popular support for the rupiah strong, 1 ORI rupiah was initially valued at 5 NICA gulden. The currency, however, depreciated fast, falling to 2 gulden within 1 week, as the market gauged fair value, 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 in republican Java alone, half the entire pre-war gulden money supply.

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 exacerbate 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.

Over the years of the Indonesian revolution, three further issues of banknotes followed all emanating from Yogyakarta, two in 1947 alone, with the fourth, much more limited in number, being issued in 1948.

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 legislated on 26 August 1947 that regional outposts in Sumatra and Java could issue their own money to replace the Japanese money, with exchange for true ORI envisaged when peacetime eventually enabled it, in part to inhibit the circulation of NICA gulden. At least thirty different towns and districts in Sumatra issued their own money, with around a dozen towns in Java doing so, starting with Banten in December 1947.

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

1950–1952 Indonesian independence recognised

In November 1949, the Dutch-Indonesian Round Table Conference
Dutch-Indonesian Round Table Conference
The Dutch–Indonesian Round Table Conference was held in the Hague from August 23 - November 2, 1949, between representatives of the Netherlands, the Republic of Indonesia and the BFO representing various states the Dutch had created in the Indonesian archipelago...

 held in The Hague, brokered peace and recognition independence for the Indonesian state, as the Republik Indonesia Serikat (United States of Indonesia), a federation of states consisting of the Republic of Indonesia (republican Java and Sumatra), along with fifteen other states. But on August 15, 2005, the Dutch have officially recognized the Independence of Indonesia at 17 August 1945, as it is the date of proclamation of Independence of Indonesia.

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 be restored as the central bank of Indonesia, despite resentment among Indonesian nationalists, the Indonesian-established BNI becoming a development bank.

A brief issue of notes was issued by the "Republic Indonesia Serikat", from June 1950, consisting of 5 and 10 rupiah notes, but with the merger of the separate states into the Republic of Indonesia in March and April 1950, with the formal declaration of the sole Republic of Indonesia confirmed on August 17, 1950, this money was short-lived.

The Sjafruddin cut

The new "Republik Indonesia Serikat" 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
Sjafruddin Prawiranegara
Sjafruddin Prawiranegara, also written Syafruddin Prawiranegara, was an Indonesian politician, economist, and latterly Islamic philosopher.- Early life :...

, sought to reduce the money supply by one half. This reform was decreed from 19 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.

1951: Nationalisation of De Javasche Bank – transformation to Bank Indonesia

Due to the desire to remove the influence of the DJB, which was dominated by Dutch, and was felt to be unwanted foreign influence on the country, and the inflamed tensions caused by the refusal of the Dutch to transfer the territory of Dutch New Guinea to the Republic, the government moved to nationalize the Dutch bank. This action, announced on 30 April 1951, involved the repeal of the old Java Bank Law of 1922, preventing non-Dutch citizens from owning shares in the bank, and negotiations with the Amsterdam Stock Exchange. The purchase was agreed at 120% of the value of the bank (which was valued at 9 million Dutch gulden), with Dutch opinion holding that the bank was properly an Indonesian asset, and hence nationalisation was a valid action. The nationalisation was completed on 15 December 1951, with DJB becoming a government institution of Indonesia.

In addition to this act of nationalisation, on 3 October 1951, the republic passed an Emergency Act on valid currency, in order to repeal the Indische Muntwet Act of 1912, which still governed valid currency in Indonesia. The consequence of the new Act was that old Dutch coins would be void for payment, and Indonesian rupiah coins would be issued with values of 1, 5, 10, 25, and 50 sen under the remit of the Indonesian government. Low-denomination Dutch banknotes were to be withdrawn in due course. This Act saw the first Republik Indonesia money being issued, of 1 and 2½ rupiah denominations, continuing the split between denominations of under 5 gulden and 5 and above between state and central bank intitiated by the Dutch.

1953–1958: Bank Indonesia born

In order that it could discontinue the issue of the resented 'De Javasche Bank' money, the government completed the Indonesianisation of DJB, with the bank becoming Bank Indonesia
Bank Indonesia
Bank Indonesia is the central bank of The Republic of Indonesia. Bank Indonesia is currently governed by Darmin Nasution, former interim governor. The last governor before the interim phase, Boediono, resigned due to his vice presidential candidacy in the Indonesian presidential election...

 on 1 July 1953 via the Principal Act on Bank Indonesia 1953. The bank had responsibility for the issue of banknotes of 5 rupiah and above (as had DJB), and the first Bank Indonesia money appeared from 1953.

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 31 July 1959: He was replaced by Soetikno Slamet.

With the unwilling ex-governor replaced, the official exchange rate was devalued on August 1, 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 24 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.

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

1965-1991: the 1000 to 1 revaluation of the rupiah

Rampant inflation
In economics, inflation is a rise in the general level of prices of goods and services in an economy over a period of time.When the general price level rises, each unit of currency buys fewer goods and services. Consequently, inflation also reflects an erosion in the purchasing power of money – a...

, which was 27% in 1961, but jumped to 174% in 1962, by 1965 was 600%, had seen the largest denomination banknote increase 100-fold, from 100 rupiah in September 1959, to 1000 rupiah in May 1960, to 5,000 in October 1963 and finally 10,000 rupiah in August 1964. As a result, during the 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. 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. 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 Indonesian Rupiah with the Riau rupiah
Riau rupiah
The rupiah was a distinct currency of Riau between 1963 and 1964. It replaced the Malaya and British Borneo dollar at par and was replaced by the Indonesian rupiah at the rate of 1 Riau rupiah = 14.7 Indonesian rupiah.-History:...

 (the Irian Barat rupiah lasted until 1971). Denominations of the new rupiah ranged from 1 sen (worthless even at issue) up to 100 rupiah, with 500 and 1000 rupiah added soon after.

By 1968 the Suharto New Order
New Order (Indonesia)
The New Order is the term coined by former Indonesian President Suharto to characterize his regime as he came to power in 1966. Suharto used this term to contrast his rule with that of his predecessor, Sukarno...

 had been established, and Bank Indonesia, as of 1968 was given sole right to issue banknotes (including notes below 5 rupiah) as well as coins (which had previously been the issue of the central government), which it did in a range from 1 to 1000 rupiah. In 1970, Indonesia added 5000 and 10000 rupiah banknotes to the range in 1970, while, with inflation finally under control, coinage was re-introduced, starting at 1 rupiah, and ranging up to 100 rupiah. September 1975 saw sub-100 rupiah notes permanently withdrawn from circulation.

1992-1999: before and after the financial crisis

By 1992, the rupiah was worth less than one fifth of what it had been worth when the 10,000 rupiah note had been introduced in 1970, and so a 20,000 rupiah note was produced, then the largest note ever seen in Indonesia.

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
United States dollar
The United States dollar , also referred to as the American dollar, is the official currency of the United States of America. It is divided into 100 smaller units called cents or pennies....

, 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 resigned after more than 30 years as Indonesia's president 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
Bank Indonesia
Bank Indonesia is the central bank of The Republic of Indonesia. Bank Indonesia is currently governed by Darmin Nasution, former interim governor. The last governor before the interim phase, Boediono, resigned due to his vice presidential candidacy in the Indonesian presidential election...

, 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, and Indonesia has reverted to the use of paper notes.

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.

Plan to redenominate rupiah

In August 2010 Bank Indonesia
Bank Indonesia
Bank Indonesia is the central bank of The Republic of Indonesia. Bank Indonesia is currently governed by Darmin Nasution, former interim governor. The last governor before the interim phase, Boediono, resigned due to his vice presidential candidacy in the Indonesian presidential election...

 proposed to redenominate
Redenomination is the process of changing the face value of banknotes or coins used in circulating currency.When redenomination occurs, financial data that spans the change must be correctly accounted for. For example, the GDP is properly documented....

 the rupiah by truncating the last three zero digits (dividing by 1000). The redenomination is meant to simplify daily transactions, which often run into millions of rupiah. The plan under consideration would be completed by 2015 at the soonest, but more likely by 2020. It would reduce the exchange rate with the US dollar from about 9,000 rupiah to 9. The plan has raised public concern that the monetary policy may devalue the currency. Bank Indonesia Governor Darmin Nasution immediately announced that the planned redenomination of the national currency would not inflict any financial losses as the measure would only strike a few zeros from the current denominations.

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 4 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 4 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 66⅔%. 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
Foreign exchange reserves
Foreign-exchange reserves in a strict sense are 'only' the foreign currency deposits and bonds held by central banks and monetary authorities. However, the term in popular usage commonly includes foreign exchange and gold, Special Drawing Rights and International Monetary Fund reserve positions...

 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
New Order (Indonesia)
The New Order is the term coined by former Indonesian President Suharto to characterize his regime as he came to power in 1966. Suharto used this term to contrast his rule with that of his predecessor, Sukarno...

', with economic policy set by the Berkeley Mafia
Berkeley Mafia
The Berkeley Mafia was term given to a group of U.S.-educated Indonesian economists whose efforts brought Indonesia back from dire economic conditions and the brink of famine in the mid-1960s. They were appointed in the early stages of the 'New Order' administration. Almost three decades of...

, 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
Native Indonesians are also known as Pribumi, literally meaning "sons of the soil", is a term that refers to a population group in Indonesia that shares a similar sociocultural heritage...

 (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 15 November 1978.

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 16 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
Trade weighted index
The Trade Weighted Index, also known as the effective exchange rate, is a multilateral exchange rate which is a weighted average of exchange rates of home and foreign currencies, with the weight for each foreign country equal to its share in trade...

 (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 30 March by 28% to 970rp.

At this time the 1980s oil glut
1980s oil glut
The 1980s oil glut was a serious surplus of crude oil caused by falling demand following the 1970s Energy Crisis. The world price of oil, which had peaked in 1980 at over US$35 per barrel , fell in 1986 from $27 to below $10...

 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-currency exchange basket, 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%.

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 14, 1997.

The rate, 2436 on July 11, was 2663 on August 14, and 2955 on August 15: 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 24 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 4, 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 8 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 1 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
Probosutedjo is the younger half-brother of former Indonesian president Suharto. Probosutedjo was one of seven children from his mother's second marriage. ....

, 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 15 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 12 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 23. 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 26 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
Currency board
A currency board is a monetary authority which is required to maintain a fixed exchange rate with a foreign currency. This policy objective requires the conventional objectives of a central bank to be subordinated to the exchange rate target....

, 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
Jakarta Riots of May 1998
The May 1998 Riots of Indonesia were incidents of mass violence that occurred throughout Indonesia, mainly in Medan in the province of North Sumatra , the capital city of Jakarta , and Surakarta in the province of Central Java...

, and in particular the run on the Bank Central Asia
Bank Central Asia
Bank Central Asia is an Indonesian bank founded on August 10, 1955.The Asian monetary crisis in 1997 had a tremendous impact on Indonesia’s entire banking system. In particular, it affected BCA’s cash flow and even threatened its survival. Panic rush forced the bank to seek assistance from the...

, Indonesia's largest private bank that ensued, causing the bank to be taken over by IBRA on 29 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
Jusuf Habibie
Bacharuddin Jusuf Habibie , also known B. J. Habibie, was the third and shortest-serving President of Indonesia, serving from 1998 to 1999.-Early life and career:...

, to power on 21 May 1998. Little action was seen immediately, and by 17 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
Bank Mandiri
Bank Mandiri , headquartered in Jakarta, is the largest bank in Indonesia in term of assets, loans and deposits. Total assets as of Q2 2010 were IDR 402.1 trillion . It also has Capital Adequacy Ratio of 23% , Return on Asset of 0.71 %, and Return on Equity of 7.38 %...

, 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

The rupiah declined from its relatively strengthened position at the end of the financial crisis, with the rupiah seeing in the century at 7,050 to the US$, but declining to 9,725 by the end of 2000, and reaching a low of 12,069 on 27 April 2001. The currency strengthened to 8,500 later in 2001, but ended 2001 at 10,505. March 2002 saw the currency break below 10,000, from which point the currency maintained a rate in the 8000s and 9000s until August 2005, and in the latter half of that year, the trading range extended towards 11,000, but ending the year just below 10,000. 2006 and 2007 saw the currency trade in a relatively narrow range against the US$ (which itself was depreciating against other currencies), of 8500–9900. This trend continued into 2008, with the currency trading between 9000 and 9500.

The Financial crisis of 2007–2008 with the collapse in the commodities market saw the US$ gain strongly against currencies backed by weakening commodities exports. With palm oil and rubber prices falling from their peak by more than half, the rupiah came under pressure, Bank Indonesia spent $7 billion of its $57 billion reserves in October defending the currency. Despite this, the rupiah began to fall. and the rupiah slipped below 10,000 on 23 October for the first time since 2005, and then below 11,000 on 2 November, a mark last reached in 2001. On November 13, Bank Indonesia introduced new regulations requiring foreign currency purchases over $100,000 a month to be backed by documentation of an underlying transaction and a tax number. The rupiah closed below 12,000 for the first time since 1998 on 20 October, with intraday lows below 13,000 hit. Subsequently, however, the cut in the Federal Reserve rate to 0–0.25% and Bank Indonesia support for the currency, saw the rupiah strengthen slightly to a range around 11,000.

The catastrophic damage to the rupiah caused in 1997–1998 severely damaged confidence in the currency. Even though the rupiah is freely convertible
Convertibility is the quality that allows money or other financial instruments to be converted into other liquid stores of value. Convertibility is an important factor in international trade, where instruments valued in different currencies must be exchanged....

 currency, it is still regarded as a risky currency to hold. , one United States dollar is worth approximately 9,000.00 Indonesian rupiah, and it was one of the least valued currency unit
Least valued currency unit
The least valued currency unit is the currency in which a single unit buys the least number of any given other currency or the smallest amount of a given good. Most commonly, the calculation is made against a major reserve currency such as the United States dollar or the euro...

 in the world.

2013 – revaluation

Darmin Nasution, the incoming governor of Bank Indonesia stated the central bank is studying revaluing its currency by removing two or three zeros from the rupiah.

See also

  • Netherlands Indies gulden
  • Netherlands New Guinean gulden
  • West Irian rupiah
  • Riau rupiah
    Riau rupiah
    The rupiah was a distinct currency of Riau between 1963 and 1964. It replaced the Malaya and British Borneo dollar at par and was replaced by the Indonesian rupiah at the rate of 1 Riau rupiah = 14.7 Indonesian rupiah.-History:...

  • Economy of Indonesia
    Economy of Indonesia
    Indonesia is the largest economy in Southeast Asia and is one of the emerging market economies of the world. The country is also a member of G-20 major economies. It has a market economy in which the government plays a significant role by owning more than 164 enterprises and administers prices on...

  • Least valued currency unit
    Least valued currency unit
    The least valued currency unit is the currency in which a single unit buys the least number of any given other currency or the smallest amount of a given good. Most commonly, the calculation is made against a major reserve currency such as the United States dollar or the euro...

External links

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