Iran to revalue the rial by lopping off zeroes as a 'cure' for inflation
- Published: May 16, 2020, 8 AM
The news that Iran’s Parliament passed a bill authorizing the action was reported by the country’s Students News Agency, which quoted a government spokesman as saying, “Eliminating the four zeros is a necessary action to simplify financial transactions.”
The currency’s name will also be officially changed from rial to toman, with 10,000 rial equal to one toman. This could create confusion because, although the rial is used in official documents, in daily business transactions and conversation, the term “toman” has long been used as equivalent to 10 rials.
The rial has been devalued 3,500 times since 1971. While the concept of lopping off zeros has been under consideration since 2008, the new sanctions of 2018, which precipitated a 60 percent drop in the rial’s value, accelerated plans. 1,000 rials are now worth 2.4 cents.
The Guardian Council of the Constitution must ratify the law before it can take effect. After that, the Central Bank of Iran will have two years to make the changes — removing rials from circulation and printing and issuing tomans instead.
Iranian economists are skeptical. One said, “The change of the currency as well as dropping too many zeros will inadvertently create unnecessary fluctuations in the economic and social structures and will even fuel the inflation … The central bank will drop four zeros but the inflation will quickly bring back two of the zeros.”
An expatriate based in Paris opined, “You typically fix the economy first and then change the currency … The government is in a financial bind with no prospect of financial aid coming from outside or from inside so they are trying this.”
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