Central Bank Governor: Iranian Rial Has Depreciated 3,500 Times Over Past Five Decades

Iran’s Central Bank governor announced on Tuesday, August 6, that 700 million banknotes are destroyed and reprinted annually in the country.

Abdolnasser Hemmati also stated that since 1350 (1971), the value of Iran’s national currency has depreciated 3,500 times.

His remarks were made during an economic commission meeting of parliament discussing the removal of four zeros from the national currency, which news agencies reported.

Regarding the cost of replacing the new currency with current banknotes, Mr. Hemmati said: “Currently, there are seven billion banknotes in the country. By converting rials to tomans, this figure will be reduced to three billion notes. Therefore, the government will not face significant costs, since 700 million banknotes are destroyed and reprinted annually.”

Iran’s Central Bank governor also added: “The current relationship between the rial and foreign currency is 0.0000008, which does not exist in any other country. We must correct the appearance of money and the rial-to-dollar ratio, which will be achieved by removing four zeros.”

He did not mention the fact that the Iranian rial is currently the world’s least valuable currency unit.

Previously, Venezuela held the record for the world’s least valuable currency unit, but the socialist government of Nicolas Maduro, Venezuela’s president, removed five zeros from the country’s national currency last summer and named it the “Sovereign Bolívar.”

In the early days of the February 1979 Revolution in Iran, one U.S. dollar was approximately 10 tomans, but it has now reached around 12,000 tomans and even reached close to 20,000 tomans at certain points last year.

Two-Year Process of Converting Rial to Toman

Mr. Hemmati says removing four zeros from the national currency is “a response to convention” and the Central Bank intends to operationalize what is already customary among the people.

He stated: “The rial is not widely used in people’s daily lives and people have always used the toman unit in their transactions… by converting rial to toman, 10,000 rials will become one toman.”

This Central Bank official also commented on the inflationary effects of removing four zeros from banknotes, saying this action has no impact on inflation.

Hemmati added that since 1350 (1971), the value of the national currency has depreciated 3,500 times, while the highest denomination of our currency at that time, which was 1,000 tomans, has now increased to 50,000 tomans.

He stated that by converting rial to toman, people can more easily conduct their transactions.

According to Iran’s Central Bank governor, removing four zeros from the national currency has currently only been approved by the government and requires parliamentary approval.

The Central Bank governor also announced: “During a two-year transition period, the rial will be converted to toman. Although initially both rial and toman will coexist in the country to avoid people facing problems, the rial will gradually be removed from circulation and the toman will replace it.”

The policy of removing zeros is used in countries that have continuously reduced the value of their national currency by increasing liquidity and inflation, adding to the number of zeros in their denomination.

In June of this year, Iran’s Central Bank announced in a report on the country’s financial situation that liquidity at the end of 2018 reached approximately 1,882 trillion (thousand billion) tomans, which increased by more than 23 percent compared to the end of the previous year.

This figure was approximately 782 trillion tomans in 2014 and less than half of last year.

Iran’s annual inflation also peaked at above 40 percent in June, which is the highest rate in the past 24 years.

Source: Radio Farda