BI to withdraw, replace banknotes

BI to withdraw, replace banknotes

The Jakarta Post, Jakarta

The central bank plans to withdraw all Rp 100,000 and Rp 50,000
notes from circulation and replace them with new ones to combat
the rise in counterfeit money, said Bank Indonesia senior deputy
governor Anwar Nasution.

"It's necessary to prevent the counterfeit (notes) from
spreading. We have to replace those bills, and that's what we're
going to do," Anwar said.

"I do not have an exact timetable, but the measure has been
discussed within the central bank for some time, and we expect
this to be realized this year," he added.

Counterfeits of the two denominations reportedly make up the
majority of fake money being produced. Non-governmental
organization Combating Counterfeit and Financial Crime (CCFC)
said they accounted for some 80 percent of the counterfeit money
confiscated by the authorities so far.

The central bank's measure is a response to the billions of
rupiah in counterfeit notes found across the country by both
itself and the National Police.

However, the findings of the two institutions differ, as Bank
Indonesia generally spots and seizes fake money circulating in
banks, while the police confiscate them during raids before they
enter the market.

Data from Bank Indonesia shows that, as of May, Rp 1.24
billion in fake money was discovered, higher than the Rp 1.06
billion seized over the same period last year.

Data from the Police, meanwhile, show that 1,155 counterfeit
notes were found in February, 5,099 in March, 1,629 in April and
5,159 in May.

Police records did not show the monetary value of the
counterfeits, but listed the areas where the money had been
seized: Central and East Jakarta; Bekasi, West Java; Surabaya;
Surakarta, Central Java; and several major cities in Sumatra and
Sulawesi.

The police has said that the increase in counterfeit notes had
been facilitated by more sophisticated printing equipment that
allowed criminals to fabricate high-quality fakes.

"The latest fakes we found looked almost 100 percent like
genuine notes," said a senior police officer recently.

The counterfeit problem is not new, but it has become a
sensitive political issue during election year, with some critics
and observers expressing concern over the possibility that fake
money was being used to bribe voters.

The country held legislative elections on April 5, and will
organize its first direct presidential election on July 5, with a
possible run-off on September 20.

The CCFC has urged Bank Indonesia to withdraw the notes before
the July 5 presidential election, when some 155 million
registered voters are expected to cast their ballots.

On the financial side, the increase in counterfeit notes could
threaten monetary stability, as it increases the volume of base
money -- or the money circulating in the market -- and thus
contributes to inflation.