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Iran plans revamp of national currency

The Iranian Cabinet has approved a bill to remove four zeros from the national currency, the rial, and rename it the toman, but economists are divided over the potential impact.
An Iranian man buys new 500 rial coins from a currency trader in Tehran October 31, 2004. Iran has introduced the new coins to eliminate the cost of printing paper money. (8670Rls=1USD) REUTERS/Morteza Nikoubazl  CJF/WS - RP5DRIAPWVAA

The Iranian Cabinet has approved a bill to make major changes to the national currency. Under the bill, the new currency would be called the toman (already the unofficial name of the currency, with 10 rials equaling 1 toman). The new toman would be worth 10,000 current rials. After this plan is approved by the legislative bodies — the Majles (parliament) and the Guardian Council — the government would start a two-year process of moving to the new currency in the hope that it would have an overall positive impact on the country’s economy. In the mentioned period, both currencies would be in place to facilitate the transition for various stakeholders.

The idea for such a change has been in place for years, but it had never been presented as a bill to parliament. The current plan was originally drafted by the Central Bank of Iran (CBI) for technical reasons, mainly to reduce the burden of printing and maintaining banknotes. CBI governor Abdolnaser Hemmati has said there are 7 billion banknotes in circulation, with 700 million notes being replaced every year. As so many bills are being produced annually, the printing of new banknotes is not expected to present a major cost to the economy. And in the medium term, the maintenance of banknotes will be more economical as there would be a need for an estimated 3 billion banknotes in circulation. Considering all the efforts in Iran to promote cashless payments, the burden may even be reduced in due course. It can also be expected that the design of the new banknotes would take into account new security measures to prevent forgery, which has been very common in Iran. The CBI also says that high inflation has led to a situation where the metal value of Iranian coins is higher than their nominal value; the CBI hopes that it can regulate the metal and nominal values in the new currency system.

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