• Monday, July 13, 2020

Iran to slash 4 zeros, rename currency

Discussion in 'Iranian Defence Forum' started by Aspen, May 5, 2020.

  1. Aspen

    Aspen SENIOR MEMBER

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    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.

    a regional epicenter of the disease, appears to have played a decisive role, contributing to a further devaluation of the rial since February.

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

    “Eliminating the four zeros is a necessary action to simplify financial transactions,” an Iran government spokesman, Ali Rabiei, said in a Twitter posting.

    The Guardian Council, a body of conservative clerics that supervises the Parliament, is expected to ratify the law, and then the Central Bank will have two years to implement the change — removing rials from circulation and issuing tomans instead.

    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.


    Fereydoun Khavand, an Iranian economist in Paris, said governments typically arrived at changing the national currency as the last stage of an economic overhaul like European countries had done after World War II or Turkey in recent years.

    Iran has done the opposite, Mr. Khavand said, partly because of the crippling effect of American sanctions, which have severely limited the country’s ability to sell oil or to conduct international financial transactions. Under those circumstances, he said other basic economic changes the Iranian government may want to undertake are difficult.

    “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.”

    https://www.nytimes.com/2020/05/04/world/middleeast/iran-currency-inflation-rial-toman.html
     
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  2. GHALIB

    GHALIB BANNED

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    iran is presently in dire straits .
     
  3. zectech

    zectech SENIOR MEMBER

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  4. khansaheeb

    khansaheeb ELITE MEMBER

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    Good opportunity for Pakistan to buy cheap oil and gas and goods from them. They have wonderful pomegranates too.
     
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  5. ali_raza

    ali_raza SENIOR MEMBER

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    we r getting enough free oil from elsewhere
    pomegranate u can get from kandhar equally tasty
     
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  6. Indos

    Indos PDF THINK TANK: ANALYST

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    I can say it has possibility to create more inflation or even hyperinflation due to psychological aspect.

    And the reason they need to change the name of the currency is to avoid that thing to happen.
     
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  7. Valar.

    Valar. SENIOR MEMBER

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    Toman is historical name of Iranian currency, I think. Rial on the other hand is more of an Arabic currency name, if I am not mistaken.

    Also, even for their current Iranian Rials, Iranians frequently or mostly use the name Toman, which is unofficial name.

    What actually happens is that, 10 rials = 1 Toman.

    So, if you buy anything for 10,000 rials, you simply call it 1000 Tomans.
     
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  8. Shabi1

    Shabi1 FULL MEMBER

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    Turkey already did this moved from Lira to Yeni Lira (New Lira). Worked out great for them.
     
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  9. American Pakistani

    American Pakistani ELITE MEMBER

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    From where? I hope it's not from those misinformation spreading sensational hyped up youtube news channels.
     
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  10. makranman

    makranman FULL MEMBER

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    well... That's gonna help with the inflation...:wacko:

    I think it is closer to 200% to 400%... at least that is what I feel living here.

    And my final 2 cents on the matter, I am positive they are NOT going to slash 4 zeros of the currency. that will cost them a fortune, which they don't have.
     
  11. QWECXZ

    QWECXZ FULL MEMBER

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    No, he means that Iranian Rial has lost 60% of its value. So, its value is now 40% of what it was before. The number can never reach 100% or exceed it obviously.

    Although that's incorrect as well. Iranian Rial has lost nearly 75% of its value. So, it has 25% of its value 5 years ago and everything has become 4 times more expensive.

    Honestly, I think slashing four zeroes is a good idea but maybe that's me only. And I don't see why it should contribute to inflation because 10,000 Rial is already pretty worthless in Iran. You can barely find an ice cream costing 10,000 Rial. Maybe a one way metro ticket costs that much. I don't know. Yeah, there will be some rounding issues but they are offering a denomination currency for Toman called Qiran to remedy that.
     
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  12. Sina-1

    Sina-1 FULL MEMBER

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    I also think they should slash the zeros. But of course that is not enough and they need manage market instability. The major source of instability currently is the changing sanction regime on Iran which is causes market concerns. Furthermore there are a lot of companies in Iran who have gone bankrupt when sanctions have eased and the domestic produced product is replaced with a foreign one. This is a vicious cycle which creates too much risk for our domestic enablers to produce goods during sanction times.

    My idea is radical. I believe the best way to trick the sanction regime and the insecurity it causes is that apply a full sanction on western goods altogether. In this way we will encourage our companies to invest in products we are in need of with a much reduced risk. Also the sanction tool of westerners becomes useless.
     
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  13. makranman

    makranman FULL MEMBER

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    whoops. rookie mistake.

    you are not the only one, and it is not a bad idea. but there are a thousand things they need to do before slashing any zeros from rial.

    this is the least they have to do, if they want a strong economy.

    I strongly disagree. we can do this if we can produce EVERYTHING we need internally. and trust me, no country can do this. not even the US can, yet.
     
  14. Sina-1

    Sina-1 FULL MEMBER

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    Iran has both the resources (material and personnel) and knowledge to produce everything! There is absolutely no doubt about that! However Iran is unable to do it cost efficiently and at a state of the art level for all these items.
     
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  15. Philosopher

    Philosopher SENIOR MEMBER

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    I can also see the psychological benefits of doing this but it must be done properly.