IRAN'S CURRENCY CHANGE

For many years, Iran’s government debated changing the national currency, the rial, by basically slashing four zeros off its face value — an acknowledgment of how American sanctions and economic mismanagement have contributed to inflation in the country.

On Monday, the Iranian Parliament essentially took that step, authorizing the replacement of the rial with another basic unit of currency called the toman. Each toman will be worth 10,000 rials under the new system.

The coronavirus pandemic, which turned Iran into a regional epicenter of the disease, appears to have played a decisive role, contributing to a further devaluation of the rial since February.

Since 2018 when the Trump administration repudiated the nuclear agreement and reimposed sanctions on Iran, the value of Iran’s currency has fallen by roughly 60 percent.

The change is the outcome of a draft bill presented in early 2019 by the governor of Iran’s central bank, Abdolnasser Hemati. He noted that the currency has been devalued 3,500 times since 1971 and that Iran had no choice but to “save the face” of its national currency, according to Iranian official media reports. Earlier attempts by President Hassan Rouhani’s government to change the currency as far back as 2016 had remained in limbo.

Supporters of the change said slashing the extra zeros would vastly simplify financial calculations in Iran by eliminating the need for Iranian shoppers to carry loads of rials to make purchases, which they must do now because of inflation. On Monday the rial’s exchange rate was 156,000 to the dollar.

But opponents argued that the plan was an added expense at a time when the government was already facing a budget deficit of between 30 to 50 percent for this coming fiscal year. The effect of the currency change, the critics said, amounted to just cosmetic window dressing.

“You typically fix the economy first and then change the currency,” said Mr. Khavand. “The government is in a financial bind with no prospect of financial aid coming from outside or from inside so they are trying this.”

To read the complete article, see:
With Inflation Ravaging Currency, Iran Is Changing Names and Numbers (https://www.nytimes.com/2020/05/04/world/middleeast/iran-currency-inflation-rial-toman.html)

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