Toman instead of rial: Iran to cut four zeros from currency in two years

Tehran has been planning since 2008 to redenominate the national currency as it continued devaluation. Now, the government is pushing the plan forward following the drastic loss of the currency value in 2018 after the restoration of economic sanctions on Tehran in 2018.

16 April 2019
ID : 21930
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The Iranian government has kickstarted studying and taking measures in a bid to slash four zeros from the national currency, saying it will take some two years to be fully implemented.

The redenomination project is set to slash four zeros from the current currency rial, change its official name from rial to toman and review the monetary units. It’s being studied at the cabient’s economic commission, according to IBENA.

“According to the plan, the new national currency will be denominated toman in which one toman will be equivalent to the current 10,000 rials or 100 new rials,” according to the report.  

If the project were implemented today, each dollar would be equivalent to 13.6 tomans based on the Sana rate, which records the average daily currency trade across the exchange bureaux in Iran. Currently, $1 equals 13.600 rials.

Central Bank of Iran (CBI) Governor Abdolnaser Hemmati officially annoucned the measure early January. “A bill to remove four zeros from the national currency was presented to the government by the central bank yesterday and I hope this matter can be concluded as soon as possible,” he was quoted by IRNA on 6 January.

Proposals to remove four zeros from the currency have floated since 2008, but the idea has gained strength as the rial lost more than 60 percent of its value in 2018 despite a recent recovery engineered by the central bank in defiance of U.S. sanctions.

The report says the measure will not only facilitate internal financial transactions, reduce costs of issuing bills but will also bring the Iranian currency in par with foreign exchange rates in the short term.  

The move is a response to the sharp devaluation of the Iranian currency last year after Donald Trump Administration withdrew the US from the 2015 international nuclear deal with Iran last May and restored economic sanctions in two rounds.

Central Bank of Iran says the “transition period” from rial to toman would take some 24 months (two years) during which old banknotes and coins are removed from circulation. 

After approval by the government, the proposed currency plan would have to be passed by parliament and approved by the Guardian Council, a body that vets legislation before it takes effect.

Many countries in the world have cut zeros from their currency in a bid to stop its further devaluation. Belarus is the latest country to go through the redenomination process in June 2016 by wiping off four zeros.  Zimbabwe also tried several times in the 2000s to cut more than 10 zeros from the Zimbabwean dollar due to hyperinflation. Turkey aslo slashed six zeros in 2005 so the lira recovers value. Venezuela has also been planning to do the same but no measures have been taken by the Caracas government. 

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