The Iranian Parliament has authorised 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 COVID-19 pandemic, which turned Iran into a regional epicentre 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%.
Iran’s rationale behind his move is to eliminate the four zeros to simplify financial transactions as 1 toman is equal to 10,000 rials.
As per the critics, Iran had no choice but to “save the face” of its national currency which has been depreciating continuously.
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 1,56,000 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 30-50% for this coming fiscal year.
The effect of the currency change, the critics said, amounted to just cosmetic window dressing.