June 25, 2021
The Majlis Research Center has called on the government to postpone the plan to drop four zeros from the currency until the economy has undergone fundamental structural reforms.
The parliamentary research center said removing zeroes “must be the last stage of a series of measures to reform monetary and economic structures.”
Galloping inflation is one of the key economic variables, which if not harnessed will render the whole plan futile, it said.
In May last year, the Majlis approved a plan to drop four zeroes from the currency and change the name to the toman. Thus, 10,000 rials would become 1 toman, worth about 4 US cents at the current rate of exchange.
The government said the main reason for the change was simply to make it easier for the public to conduct transactions.
The governor of the Central Bank, Abdolnasser Hemmati, also said the country would save money by not having to print so many banknotes. He said eight billion banknotes are in circulation, five billion of which are below 20,000 rials (8 cents).
“By changing the monetary unit, we can mint coins worth 2 tomans, which in fact equals the current 20,000-rial banknote,” he said. He explained that the government spends 4 trillion rials ($15 million) a year just to destroy mutilated banknotes and print new ones.
But the Majlis Research Center suggested instead that the bank simply issue coins for larger denominations and print banknotes with higher denominations so the public doesn’t have to use wads of bills for routine transactions, wearing them out more quickly. (The largest denomination currency today is 1,000,000 rials, worth $3.85.) The research center also recommended the Central Bank promote electronic retail payments.
Provisions of the law stipulate a maximum two-year “transitional period” during which both the toman and rial will be valid as legal tender. The government has started issuing bills with the last four zeroes shaded so the public can use them under both the outgoing system and the incoming system.