BI denies plan to pull Rp 50,000 note

JAKARTA (JP): Bank Indonesia denied on Tuesday rumors that the government is planning to replace the Rp 50,000 banknote currently in circulation.

BI senior official H.Y. Susmanto, who is in charge of supply and circulation of rupiah banknotes, said he had not received any order to print a new Rp 50,000 banknote.

"I have not received any order from the top to design and print a new note," he told The Jakarta Post in an interview.

There have been rumors in the financial market that the government had completed preparations for replacing the Rp 50,000 banknote, in a bid to force the return of trillions of rupiah carried overseas by Indonesians fleeing the country around the time of last year's bloody riots and the downfall of Soeharto in May.

The 50,000 rupiah bill, the highest banknote denomination in Indonesia, bears the smiling face of Soeharto, who was, during his lengthy rule, considered an equal of the national heroes portrayed on smaller denominations.

Another reason mentioned for a possible withdrawal of the note was the effort to curb the increasing occurrences of currency forgery.

However, Susmanto said that designing and printing a new banknote was a costly procedure, and would be a great burden on the country, which is suffering from its worst economic crisis in three decades.

"Let's not get too emotional. We have spent a lot of money (on designing and printing the current notes), and we're still in a crisis. The available resources should be better used for other higher priority programs," he said.

He said that the average cost for designing and printing 500 sheets of a particular note was more than US$150.

He said the current Rp 50,000 bill, issued in 1995, was of good quality, and that the notes are expected to remain in good condition for seven years after being issued.

He admitted that the decision to replace a particular banknote was in the hands of the cabinet, and that the question of whose portrait should be shown on the note is especially important.

It takes about two and a half years to bring a new note into circulation, from the design process until the bills are printed, Susmanto said.

"In some cases this could be shortened to around 19 months," he added.

He said that decisions on the design of the note and its security features take up the longest process and will also involve the appointment of a new minting contractor through an international tender.

He admitted that rupiah counterfeiting was rampant during the current crisis, but said that the 10 thousand rupiah bill was the most frequently forged.

"That is based on fake bills discovered by the police," he said.

He also denied the suggestion that BI would resort to printing a new Rp 50,000 bill because its attempts to encourage the return of the notes to the country by raising interest rates had been frustrated.

Analysts have said that the rupiah notes kept overseas, particularly in Singapore, had been used for speculative transactions with the currency, making it more difficult for the monetary authority to stabilize the rupiah exchange rate against the U.S. dollar.

The rupiah has been hovering at around Rp 9,000 to the dollar over the past couple of months, compared to Rp 2,450 in the middle of 1997, before the collapse of the currency.

Bank Indonesia Governor Sjahril Sabirin said on Monday that the government was considering a penalty system to control the physical transfer of rupiah leaving and entering the country in a bid to curb counterfeiters and speculation on the currency overseas. (rei)