Iranian government officials have reportedly approved a plan to slash four zeros from the national currency, the rial, which has been falling sharply in value amid chronic inflation and the U.S. sanctions. The official currency will also be replaced. Economists, however, are sceptical about how the changes will affect the Iranian economy.
The Iranian parliament has reportedly passed a bill to allow the government to cut four zeros from the national currency, the rial. The country’s weak currency and persistently high inflation have led to street protests since late 2017.
Ali Rabiei, a spokesperson for the government of Iran, said in a tweet: “Eliminating the four zeros is a necessary action to simplify financial transactions.” According to reports, the Guardian Council of the Constitution is expected to ratify the law before it can take effect. Iran’s state TV noted that the Central Bank of Iran (CBI) will have two years to implement the changes — removing rials from circulation and issuing tomans instead.
Abdolnaser Hemmati is the current governor of Iran’s central bank. According to the bill passed, the central bank will have two years to implement the changes. The governor of the Central Bank of Iran, Abdolnaser Hemmati, has promised to implement the reform as soon as possible, the Financial Times reported. He told the country’s parliament on Monday: “Currently, our money has a horrifying difference with euro and [one rial] equals €0.000006 … The efficiency of the national currency has declined due to chronic inflation over five decades.”
The changes are the outcome of a draft bill that Hemmati introduced early last year. The central bank governor noted that his country’s currency had been devalued 3,500 times since 1971. According to reports, the idea of removing four zeros from the national currency has been discussed since 2008, but it became a priority after the U.S. imposed sanctions on the country in 2018.
As reported on bitcoin.com, the value of Iran’s currency has been steadily declining since the Islamic Revolution in 1979 but that drop has accelerated in recent years fueled by U.S. sanctions. Since the Trump administration exited Iran’s 2015 nuclear deal and reimposed sanctions on the country in 2018, the value of Iran’s currency has fallen by roughly 60%. The Iranian currency was trading at about 163,000 rials per dollar on unofficial markets at the time of this writing. In addition, the coronavirus pandemic has contributed to a further devaluation of the rial since February. To evade sanctions, Iran has also turned to cryptocurrency. The country has approved more than 1,000 bitcoin mining licenses.