Iran’s Currency Falling

The Iranian currency Rial today reached a record low against the US dollar, trading in Tehran’s exchange markets at nearly 13,000 rials per dollar. The new value represents a 30 percent decline against the dollar in less than a year. The Central Bank of Iran has set the new official rate at 10,810 rials against dollar, but the move has not been successful in stopping the decline in rial’s value in exchange markets.

Parsi to Replace Rial as National Currency

Rial to Lose Four Zeros to Become Parsi

The Central Bank of Iran (CBI) announced today that it will send legislature to the Majlis establishing a new national currency, tentatively named parsi, by eliminating four zeros from the current rial. Based on today’s foreign exchange rates, the parsi will be worth 87 cents (0.87 USD).

The deputy governor of CBI, Hossein Qazavi, told reporters in Tehran that parsi as the proposed name for the new currency was the choice of the majority of respondents in a nationwide poll that was conducted in the past 48 hours [Fars News Agency, 19 July].

Iran’s New Currencies: Rial and Dinar

The Director of Central Bank of Iran (CBI) Mahmoud Bahmani today confirmed reports that the rial, the country’s currency, will be redenominated soon by removing four zeros, with one new rial equaling one dollar (currently 10,000 rials equal one dollar). The new rial will also have a smaller unit that will be called dinar. Each rial would equal 100 dinars [IRNA, 11 April].

CBI asserts that the redenomination of rial would decrease the quantity of currency in circulation and would lessen the inflationary pressures. The critics believe without comprehensive economic and monetary policies, the move would increase the inflation.

Redenomination of Rial: Four Zeros, Not Three

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.

Removing Zeros Is Not the Solution – Chamber President

The President of Iran’s Chamber of Commerce Mohammad Nahavandian today warned the government that eliminating three zeros from the national currency would not resolve the inflation problem. On Saturday, the minister of economy had announced that Iran would soon redenominate its currency by eliminating three zeros from its unit. At present, each dollar equals more than 10,000 rials. After redenomination, each dollar would become 10 rials (or one touman as the local currency is popularly referred to.)

“Tackling economic problems requires an ability to distinguish between the superficial and the real. The number of zeros is not our real problem. If by removing the zeros we could fight the inflation, then the solution was easy. We need to fight the root causes of inflation, not the zeros,” Nahavandian said.

“The economic reconstruction requires the expansion of real market competition, elimination of all subsidies, and a move from (the current) hand-out economy to a production economy which creates real jobs,” Nahavanian added [Donya-e Eqtesad, 5 April].

Iran to Revaluate Its Currency

Iran’s Minister of Economy and Finance Shamsodin Hosseini announced today in Tehran that Iran will soon redenominate its currency by eliminating three zeros from its current unit. At present, 10,000 Iranian rials equals one US dollar. With redenomination, 10 new rials (or one touman as the currency is popularly known) would equal one dollar. Since the revolution, the Iranian rial has dramatically lost its value against dollar, from 70 rials to a dollar then to over 10,000 rials to a dollar now.