Iran's Cabinet votes to change national currency

Decades after the first plan to slash zeros from the Iranian rial, President Hassan Rouhani’s Cabinet has sent a bill to parliament to make changes to the country's currency.

al-monitor A money changer holds Iranian rial banknotes as he waits for customers in the business district of Tehran, Jan. 7, 2012. Photo by REUTERS/Raheb Homavandi.

Topics covered

iranian economy, toman, rial, guardian council iran, exchange rates, economy, economic growth, currency, central bank

Dec 8, 2016

President Hassan Rouhani’s Cabinet voted on Dec. 7 to approve a bill that proposes to change Iran’s currency from the rial to the toman, and to remove one zero, the official Islamic Republic News Agency (IRNA) reported. The measure was proposed by the Central Bank of Iran (CBI) and needs parliament and Guardian Council approval to take effect.

The move came less than a month after Abolfazl Akrami, the director general for economic affairs at the CBI, told the semi-official Iranian Student News Agency that the CBI had no plans to slash zeros from Iran’s national currency. On Nov. 14, he stressed, “If the inflation rate remains below 10%, if we manage to unify multi-tier exchange rate and if economic growth remains stable, then we can remove [a] zero from the national currency.” Iran currently has two exchange rates; the CBI fixes the official one, and the other is the informal open market rate.

Meanwhile, the deputy governor of the CBI, Akbar Komijani, on Dec. 8 told IRNA that the move should not be considered as the implementation of “monetary correction” in the country, but to “respect the public and accept the currency that they use on a daily basis.”

The rial has been Iran’s official currency since March 23, 1932. Nevertheless, apart from officials and due to the sharp fall of the rial’s value in recent years, Iranians in their daily lives use the toman, which is equal to 10 rial. Neither "rial" nor "toman" are Persian words, but have Turko-Mongol and Spanish-Portuguese origins, respectively, with "rial" deriving from "real" (royal).

It is not the first time Iranian authorities proposed a program to eliminate zeros from the national currency. In 1993, the CBI worked on a plan to remove three zeros from Iran’s currency, but officials never reached an agreement on the proposal. Then on Jan. 20, 2010, the proposal was in the spotlight again when former President Mahmoud Ahmadinejad announced that his administration would remove three zeros from the national currency — that plan was never implemented either.

Analysts believe that the unknown outcomes of such plans are the main reasons administrations avoid removing several zeros from Iran’s currency. The Reformist Shahrvand newspaper in a Dec. 8 article published the viewpoints of various economists on the recent decision to change the official currency.

The daily quoted Hadi Hagh-Shenas, an economist and former member of parliament, as saying that “nothing will change” in Iran’s economy by slashing one zero from the national currency. “It has been a long time since the public used the toman to trade. The official market has also been working with the toman. Today, the rial has no meaning in our country.”

The daily Etemad also said that removing one zero from the currency will not resolve Iran’s economic issues. “Facilitating daily trade, simplifying accounting operations and reducing the expenses of issuing banknotes were the main reasons to remove zeros from the currencies in other countries,” wrote the daily. “If we remove only one zero from our currency, none of those goals can be met.”

Meanwhile, the government-run newspaper Iran warmly endorsed the move and led its coverage of the bill with “Toman: The New Currency of Iran.” The daily quoted Mohsen Bahrami Arze Aghdas, a member of the Tehran Chamber of Commerce, as saying, “This will be a good move in favor of our national economy.”

Continue reading this article by registering at no cost and get unlimited access to:
  • Al-Monitor Archives
  • The Week in Review
  • Exclusive Events
  • Invitation-only Briefings

Recommended Articles

Rouhani: Iran’s economy handled pandemic better than US
Al-Monitor Staff | Coronavirus | Aug 4, 2020
Can Jerusalem mayor improve situation of Arab residents?
Danny Zaken | Israeli-Palestinian conflict | Aug 3, 2020
History repeats itself in Iran's currency exchange market
Ali Dadpay | Economy and trade | Jul 22, 2020
The long road to post-COVID economic recovery in the Middle East
Karen Young | Economy and trade | Jul 15, 2020
Why Turkey is trying to improve its profile in the Maghreb
Metin Gurcan | Economy and trade | Jul 10, 2020

More from  Iran

al-monitor
Iran hangs protester despite calls to halt execution
Al-Monitor Staff | Human rights | Aug 5, 2020
al-monitor
Rouhani: Iran’s economy handled pandemic better than US
Al-Monitor Staff | Coronavirus | Aug 4, 2020
al-monitor
Iran arrests US-based leader of exile group
Al-Monitor Staff | Iran protests | Aug 3, 2020
al-monitor
Could fraud allegations shatter Iranian parliament speaker's dream for presidency?
A correspondent in Tehran | Corruption and nepotism | Aug 3, 2020