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Iran to switch currency from rial to toman

8 December 2016 16:45

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Iran is gearing to switch its national currency back to the toman – a move that would end the rein of the rial after around 90 years and also could boost the value of the country’s national currency against the US dollar. 

The administration of President Hassan Rouhani in a cabinet meeting on Wednesday approved the switch, as reported by the domestic media.  The plan still needs to be approved by the Parliament and later the Guardian Council that checks the laws against the Constitution and the Sharia law of Islam. Nevertheless, speculations over the impacts of the move are already emerging.

Valiollah Seif, the governor of the Central Bank of Iran (CBI) who reportedly proposed the switch, was quoted by the media as saying that the move is meant to facilitate the transactions by the public.  Seif emphasized that the rial had been literally removed from transactions in Iran for long in what he said was a result of rising inflation over the past decades.

“Switching the national currency from the rial to the toman is a measure which is meant to facilitate transactions by the public, to acknowledge what the people generally accept in their current trend of trade and to match the economics of the society with the realities,” he was quoted by IRNA as saying.

One toman would be worth 10 rials and switching to the toman means that a zero would be removed from price figures.  This, Seif said, was a plan that had been on the agenda of Iran’s banking sector and it would not have any impacts on the country’s inflation rate.

The Iranian currency was known as the toman until the 1930s, when the name was changed to the rial at a rate of 10 rials to a toman. Nevertheless, the Iranians continued to use the old terminology even after the change and the rial only remain in the official language.

It is still not clear when new coins and bank notes will be made available after the go-ahead is giving for the currency switch.

Mohammad-Reza Ranjbar Fallah, a Tehran-based economist and a university lecturer, was quoted by the media as saying that Iran needs to drop several zeros from its national currency instead of one.

Also, MP Hassan Hosseini Shahroudi, who is a member of the presiding board of the Parliament’s Economic Commission, emphasized that the plan to switch to the toman would deliver a short-term shock to the currency market in Iran, adding that everything would be back to normal later on.

Gholam-Reza Mesbahi Moqaddam, a member of Iran’s Expediency Council and a former MP, praised the policy, and said it would create a unity between the spoken and formal use of the national currency.

Amir Nojoomi, the secretary of Iran’s High Council of Exchange Shops, was quoted by the domestic media as saying that switching to the toman will increase the value of Iran’s national currency against the US dollar 10 folds. “President Rouhani’s move is like what Turkey’s President Recept Tayyip Erdogan did,” Nojoomi said. “When he took office, he [Erdogan] ordered to strike six zeros from Turkey’s national currency.  Accordingly, the people had one lira in banks for every six million liras.”

The official exchange rate of the US dollar in Iran – which is determined by the CBI – is 32,150 rials and its unofficial rate – the street rate – is above 37,000 rials.

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