After the announcement on Sunday by Iran minister of economy that the government intends to redenominate the currency by removing three zeros, today the governor of the Central Bank of Iran (CBI) told reporters that the intention is to remove four zeros, and not three, making one rial approximately equal to one dollar. The CBI governor said the legislative framework for redenomination of the currency would be readied within six months. He said removing four zeros from the current unit would eliminate the need for CBI to print increasingly large denomination notes.
The reason given by CBI for the necessity of removing four zeros follow the logic offered by many of our commentators, including our own Amir Taheri, that the removal of zeros is for convenience. People would no longer need to carry large amounts of money with them, and that in practical terms there are already bank cheques in wide use that function as large denomination bills.
The critics point out that such drastic redenomination is usually a step taken after a period of high inflation is ended and there are no expectations for a period of renewed inflation, and Iran does not meet the criteria as the gradual removal of government subsidies are expected to create a long period of high inflation. Besides, the establishment of electronic money transfer system renders large paper bills or cheques unnecessary.