Iran plans revamp of national currency

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.

Beyond the CBI’s technical considerations, there are also social and economic reasons that compelled the Iranian government to advance this plan at the current juncture. 

One reason that many political figures, including President Hassan Rouhani, have mentioned is that the society at large does not use the term rial. The word toman (representing 10 rials) has been used in Iran since the 1930s. Taking into account the high inflation of recent decades, ordinary people have even started to refer to 1 toman as being 10,000 rials, as a toman worth 10 rials no longer has tangible value. In fact, the lowest value coin in Iran is 50 rials, or 5 tomans.