New Banknotes a Possibility as Rials's End Looms
If the decision made by the Cabinet to change Iran’s monetary unit is implemented, Iranian banknotes will also undergo changes, a deputy governor of the Central Bank of Iran said.
“If the decision is approved by the parliament, it is possible that minor changes will be considered when printing new banknotes at the beginning of the next year (in March),” Akbar Komijani was also quoted as saying by the official Telegram channel of CBI.
“It is possible to make changes to the new banknotes, but the public will be informed before any changes are made.”
In a move that will lop off one zero from the national currency, the government approved changing Iran’s monetary unit from rial to toman in the Cabinet’s latest meeting on Wednesday.
While rial (10 of which equal one toman) has been used as Iran’s monetary unit in official documents and budget statements, toman has long been used in daily transactions by citizens. The government will send the bill to the parliament for the final approval.
Under the proposed plan, 10 rials would equal one toman, reversing the initial conversion established in 1932.
Komijani said replacing rial with toman does not equate a revaluation proper.
“Currently many studies are underway on revaluating and removing zeros from the national currency and while the matter has not been addressed in the Banking Reform Bill and the Central Bank Bill, it will be addressed in the future extensively in the form of a separate bill,” he said.
“That is because revaluation is a more encompassing endeavor and all monetary, economic and accounting factors must be considered in it.”
Noting that the central bank has done many studies on how to reform the monetary and banking regulations, the official pointed out that the bank is putting in finishing touches.
According to Komijani, work on honing the Banking Reform Bill and the Central Bank Bill has been completed and the bills have been presented to the government.
“Corrections will be made in the process of reviewing these two bills and the government will subsequently send them to the parliament,” he added.
The two bills have been crafted to upgrade and modernize banking regulations. Improving the independence of CBI, enhancing monetary policymaking and increasing CBI’s supervision over the money market are among their key goals.
Commission: Drop More Zeroes
While the Cabinet has approved the removal of one zero from the national currency, the head of Majlis Economic Commission advocates dropping some more.
“Reducing the number of zeroes in the national currency will improve monetary transactions on the economic landscape and so we believe these decisions can have positive effects on the country’s economy,” Mohammad Reza Pour-Ebrahimi said in a phone interview with the state television.
With the replacement of banknotes, changes should also be made in the accounting system and the national treasury procedures.
Pour-Ebrahimi believes this process may take a year.
“The value of the currency will fare better if three to four zeroes are removed from the national currency instead of one,” he said.
There has been much talk about removing three or four zeros from the rial in the past few months, as experts stress that revaluation of the national currency could help boost its efficiency and ease daily transactions.
In fact, the cost of printing the new banknotes is expected to far outweigh its benefits, which makes the whole exercise doubtful.
However, not everyone takes a positive view of the Cabinet’s move, with the head of the Economics Department of Allameh Tabataba’i University in Tehran calling it inconsequential in Iran’s current economic climate.
“I am neither in favor nor against removing a zero and changing the national monetary unit, because I believe these two matters are completely irrelevant under the current economic circumstances,” Abbas Shakeri added.
“This is only a nominal action and will have no significant impact on the economy.”
CBI Governor Valiollah Seif also took to the instant messaging app Telegram on the day the plan was unveiled, saying it should not be considered as currency revaluation and it has only been taken up to “help ease money transactions for the public”.
“Currency revaluation has been fully studied by the Monetary and Banking Institute. We have identified all the prerequisites for implementing reforms in the national currency, stable single-digit inflation being one of them,” he said.