The rial, the currency unit used consistently in Iran for almost a century, will be totally abandoned once the country introduces a redenomination.
Iran’s new small unit of currency under toman will be named parseh and not rial, as previously reported in the media, based on the terms of a bill sent by the government to the parliament on Wednesday.
“Iran’s unit of currency is toman and each toman is equal to 10,000 current rials and equal to one hundred parsehs,” read the Article A of the Bill to Reform Iran’s Monetary and Banking Law, ratified by the Cabinet on August 4, 2019.
The bill said the rial will continue to remain a legal tender for a maximum of two years of transition period which will begin once the new currency is introduced to the markets.
“After the transition period, all liabilities that have been accrued based on the currency unit of rial will only be settled through the currency unit of toman,” read a sub-article of the bill, a copy of which was circulating in the Iranian media on Wednesday.
Iran’s decision to slash four zeros off the rial comes less than a year after the national currency plunged in the face of a series of American sanctions.
The rial regained some of its footing last month after the government announced measures to narrow the gap between the price of the currency in the unregulated market and a system meant to collect foreign currencies earned from exports.
Analysts believe redenomination of currency in Iran will have a slight psychological impact on the markets as the government tries to improve macroeconomic indicators.