History
The presence of the Dutch in Netherlands New Guinea had been a subject of disagreement ever since the treaty that negotiated the Dutch withdrawal from Indonesia in 1949. The Dutch were unwilling to cede to Indonesian control, preferring instead to establish a state of Papua. The Indonesians eventually broke off diplomatic relations with the Dutch, on 17 August 1960. Due to the Indonesians insurgency and confusion over the status of the province, the UN took control as West New Guinea under the authority of the United Nations Temporary Executive Authority on 1 October 1962. On 1 May 1963, UNTEA agreed that the province would be transferred to Indonesia, as Irian Barat (West Irian), a province of Indonesia.
By Presidential decree of Soekarno, on the day of May 1 1963, the existing Netherlands New Guinean gulden was to be withdrawn, replaced at par, with government-issued coinage, government 1 and 2½ rupiah notes, with larger denomination notes to be issued by Bank Indonesia (the same division between government (aka treasury notes) and bank notes as existed for the Indonesian rupiah). Since the West Irian rupiah was replacing the gulden, which was a much stronger currency than the Indonesian rupiah, the Indonesian currency was not valid tender in Irian, in order to preserve the value of the Irian currency.
Hyperinflation in Indonesia (which due to the separate monetary policy and currency, did not afflict Irian, although inflation was certainly still present) had necessitated a 1000 to 1 devaluation of the national currency in December 1965. It was the intention of the Presidential decree of 13 December 1965 that the 'rupiah baru' (new rupiah) become the unified national currency of all of Indonesia, exchangeable for the Irian Barat rupiah at par. However, a subsequent decree of 15 September 1966 restored the validity of the Irian money, recalling the Indonesian rupiah from Indonesia.
The Indonesian rupiah only finally became legal tender in Irian on 18 February 1971. The existing Irian Barat money was exchangeable from May 1971 at the rate of 1 Irian Barat rupiah to 18.9 Indonesian rupiah. Thus given the official exchange rate of 378 Indonesian rupiah to 1 US$ at the time, it can be seen that the Irian Barat rupiah was ultimately worth exactly US$0.05. The Netherlands New Guinea gulden, fixed at par to the Dutch guilder, was exchangeable at 3.62 to the US dollar at the time of original conversion in 1963. Relative to the dollar therefore the currency had lost 82% of its value in 8 years.
The Irian Barat rupiah circulated alongside the Indonesian rupiah as legal tender, for a further two years, until 1 April 1973.
Read more about this topic: West Irian Rupiah
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