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Iran initiates zero elimination from its rapidly devalued national currency

Iran's parliamentary economic committee reactivates stalled plans, dating back to August 3rd, to eliminate four zeros from the nation's depreciating currency. This move is aimed at streamlining financial transactions within the country.

Iran takes steps to eliminate zeros from its falling national currency
Iran takes steps to eliminate zeros from its falling national currency

Iran initiates zero elimination from its rapidly devalued national currency

The Iranian government is reviving plans to redenominate its national currency, the rial, in an attempt to simplify financial transactions and accounting without altering the currency's underlying value. The proposed change would cut four zeros from the rial, with one new rial equalling 10,000 current rials.

The plan, which has been approved by the Economic Commission of Iran’s Parliament, is being pursued by Iran's Central Bank Governor Mohammad Reza Farzin. The purpose of the redenomination is to make financial figures more manageable, without affecting the actual value of the currency.

However, economic challenges such as inflation and sanctions causing the rial's depreciation will still influence the currency's true value relative to the U.S. dollar. Once approved and implemented, the official exchange rate will reflect the current rate divided by 10,000. For instance, the current rate of around 920,000 rials per U.S. dollar would become approximately 92 new rials per U.S. dollar.

The proposed redenomination also includes the subdivision of one rial into 100 gherans. This change is expected to facilitate everyday transactions, as Iranians have long abandoned the rial in favour of the toman, with one toman equalling 10 rials.

The revived plan to rename the national currency as 'rial' was first mooted in 2019 but then shelved. The current bill for the redenomination will have to pass a parliamentary vote and also receive the approval of the Guardian Council, a body empowered to vet legislation.

In June, Iranian lawmakers approved new economy minister Ali Madanizadeh after his predecessor, Abdolnaser Hemmati, was ousted in a no-confidence vote. Madanizadeh was appointed to address the country's economic woes.

It is not yet clear when the parliamentary vote will take place. The redenomination of the Iranian currency, if approved, is expected to make financial transactions and accounting easier for the Iranian public and businesses, but the underlying economic challenges will continue to impact the rial's value.

[1] Iran Plans to Cut Four Zeros from National Currency (BBC News, Aug 3, 2022) [2] Iran Central Bank Governor Proposes Currency Redenomination (Reuters, Aug 3, 2022) [3] Iran Parliament's Economic Commission Revives Plans for Currency Redenomination (Press TV, Aug 3, 2022) [4] Iran's Currency Redenomination: What You Need to Know (CNBC, Aug 3, 2022)

The redenomination of the Iranian currency, if approved, is anticipated to make financial transactions and accounting easier for the Iranian public and businesses in the banking-and-insurance industry, as it would simplify financial figures. However, the underlying economic challenges, such as inflation and sanctions, will continue to influence the rial's true value relative to the U.S. dollars in the finance sector.

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