PayvandNews – The Iranian parliament has approved the details of a government bill to drop four zeros from the national currency rial. Reports in the local media on Wednesday said that the parliament’s economic committee had gone through all technical details of the bill which seeks to amend Article 1 of Iran’s Monetary and Banking Law to allow the government to overhaul the currency.
Impact of dropping 4 zeros from Iran’s national currency:
Estimated cost savings of $12 million per year in currency production
The bill had obtained the initial endorsement of the Iranian parliamentarians in October but a final approval was tied to further deliberations in the economic committee of the assembly.
The Wednesday approval means that the government would effectively be able to start preparations for the redenomination of rial, a process which is expected to take two years and cost more than $150 million.
Under the government plan, Iran will scrap rial, a currency in use in the country for almost a century, to introduce toman as the main unit of currency.
Each toman will be equal to 10,000 current rials and equal to 100 parsehs, the name chosen for the currency’s new small unit.
The bill also stipulates that the rial should remain a legal tender for a maximum of two years of transition period after toman is introduced to the markets.
A main aim of the bill is to simplify transactions and allow the government to save more by stopping to issue billions of devalued notes and coins each year. It is estimated that the new scheme would save the government around $12 million each year.
Experts believe slashing four zeros off the rial would have a slight psychological impact on markets affected by its devaluation against major international currencies over the past years.