President Hassan Rouhani sent the rial redenomination bill to the Majlis on Wednesday for debate.
As per the ‘Reforming Monetary and Banking Law’ bill, four zeros will be shaved off the national currency and the monetary unit will switch officially from the rial to the commonly used toman, the official government website, dolat.ir reported.
Originally floated as a Central Bank of Iran proposal, the bill was approved by the government earlier in the month. It must be endorsed by the Majlis to become law.
Accordingly, the minor monetary unit of the new currency will be dubbed ‘parseh’.
If the bill is okayed by the legislature and becomes law, 10,000 rials will be equal to 1 toman and each toman 100 parseh.
The parity rate of the new legal tender against foreign currencies will be determined based on the new currency system and observance of currency reserves and commitments to the International Monetary Fund.
The government bill stipulates maximum two years as a ‘transition period during which both rial and toman will be valid.
“After the transition phase, past liabilities based on the rial would be fulfilled only in toman,” the government said.
Among other things, the initiative aims to lift the value of the rial, facilitate monetary transactions, cut the cost of printing banknotes and coins and enhance efficiency of the lethargic financial sector.
Government and banking officials have cautioned that getting rid of zeros does not intend to make deep changes in macroeconomic variables, such as improving purchasing power and taming inflation.
Defending the revaluation policy, the CBI Governor Abdolnasser Hemmati said seven billion pieces of banknotes in circulation could be reduced to 3 billion if the monetary unit changes.
He stressed that the measure is a positive response to whatever is popular among the people.
The idea of lopping off zeros from the national currency has been floated for almost 16 years, but has been put on the back burner for a variety of reasons, including political sensitivities.
