20 May 2024
Tuesday 5 May 2020 - 15:02
Story Code : 375201

With inflation ravaging currency, Iran is changing names and numbers

The New York Times | : The rial unit of currency, which has lost much of its value against the dollar, will be replaced by the toman, which the government says will be worth 10,000 rials.

For many years, Irans government debated changing the national currency, the rial, by basically slashing four zeros off its face value an acknowledgment of how American sanctions and economic mismanagement have contributed to inflation in the country.

On Monday, the Iranian Parliament essentially took that step, authorizing the replacement of the rial with another basic unit of currency called the toman. Each toman will be worth 10,000 rials under the new system.

The coronavirus pandemic, which turned Iran into a regional epicenter of the disease, appears to have played a decisive role, contributing to a further devaluation of the rial since February.

Since 2018 when the Trump administration repudiated the nuclear agreement and reimposed sanctions on Iran, the value of Irans currency has fallen by roughly 60 percent.

Eliminating the four zeros is a necessary action to simplify financial transactions, an Iran government spokesman, Ali Rabiei, said in a Twitter posting.

The Guardian Council, a body of conservative clerics that supervises the Parliament, is expected to ratify the law, and then the Central Bank will have two years to implement the change removing rials from circulation and issuing tomans instead.

The change is the outcome of a draft bill presented in early 2019 by the governor of Irans central bank, Abdolnasser Hemati. He noted that the currency has been devalued 3,500 times since 1971 and that Iran had no choice but to save the face of its national currency, according to Iranian official media reports. Earlier attempts by President Hassan Rouhanis government to change the currency as far back as 2016 had remained in limbo.

Supporters of the change said slashing the extra zeros would vastly simplify financial calculations in Iran by eliminating the need for Iranian shoppers to carry loads of rials to make purchases, which they must do now because of inflation. On Monday the rials exchange rate was 156,000 to the dollar.

But opponents argued that the plan was an added expense at a time when the government was already facing a budget deficit of between 30 to 50 percent for this coming fiscal year. The effect of the currency change, the critics said, amounted to just cosmetic window dressing.

Fereydoun Khavand, an Iranian economist in Paris, said governments typically arrived at changing the national currency as the last stage of an economic overhaul like European countries had done after World War II or Turkey in recent years.

Iran has done the opposite, Mr. Khavand said, partly because of the crippling effect of American sanctions, which have severely limited the countrys ability to sell oil or to conduct international financial transactions. Under those circumstances, he said other basic economic changes the Iranian government may want to undertake are difficult.

You typically fix the economy first and then change the currency, said Mr. Khavand. The government is in a financial bind with no prospect of financial aid coming from outside or from inside so they are trying this.

A version of this article appears in print on May 5, 2020, Section B, Page 9 of the New York edition with the headline: Irans Inflation-Ravaged Currency Will Be Replaced.
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