The Iranian Parliament on Monday voted for the details of a government monetary reform bill which will change the country's currency name and drop four zeros from banknotes.
Under the new law, which will come into effect after the final approval of the Guardian Council, the national currency unit will change from the rial to the toman with 10,000 rials of today being equal to one toman in the new currency.
Currently, 10,000 rials equal 6.5 U.S. cents and the new currency will be worth the same on the free exchange market. During the monarchy 10,000 rials was worth close to $150.
The rial will completely be scraped and the toman will be revalued to equal 100 parsehs. The old coins and bills will remain credible alongside the new toman notes during a transition period of two years after which all financial transactions will solely be made in toman.
The move to make the monetary reform was first initiated in 2008 during the presidency of Mahmoud Ahmadinejad but remained dormant due to the complications arising from the change of currency.
The devaluation of the national currency against the dollar and other major currencies due to the resumption of U.S. sanctions in 2018 prompted the government of President Hassan Rouhani to once again put the monetary reform on the agenda in 2019.
Experts say the reform will have no effect on inflation. Currently, the annual inflation rate in Iran stands at an alarmingly high 38.6 percent. According to presidential spokesman Ali Rabiei slashing the zeros is meant to simplify financial transactions and accounting. Abdolnaser Hemmati, the Governor of the Central Bank of Iran (CBI) has pointed out that dropping zeros from the national currency will help reduce the number of banknotes in use from nine billion pieces to 2.2 billion pieces.
Although the rial has been the sole currency unit used in Iran since decimalisation in 1932, the toman has been used informally to mean 10 rials. People commonly express amounts of money and prices of commodities in tomans rather than rials. The parseh, however, is a completely new currency unit chosen in a national vote for the naming taken by the CBI.