Iran ponders revaluation of Rial

  The government’s economic reform working group has started studying the feasibility of eliminating zeros from the national currency.  Experts believe the move could help increase the value of the national currency if inflation in controlled.  The plan has been floated at irregular intervals for several years as a measure for reducing the volume of bills in circulation that has become a big problem for both the people and banking officials.  It is believed that the lopping off of zeros will help make transactions easier, keep accountancies more efficient, assist in the convenient transfer of money, reduce the psychological impact of inflation and save precious time in counting the huge wads of money.  However, the plan has been put on hold for extended periods largely because of the fear that its incorrect execution could result in unwanted consequences and possibly make a bad situation worse.  But this time the issue has been raised seriously. The working group has approved the core of the plan, but it is not yet clear if, when or how it will be implemented.  Majlis Economic Commission Rapporteur Mohammad Reza Khabbaz is of the opinion that the move will help curb inflation. 

7-Point Plan:  “The government has proposed a 7-point economic reform. The points include rehauling the subsidy regime, improving productivity, efficiency in the Customs Administration, rectifying banking regulations, and revising money and banking policies. The plan for eliminating three zeros from the national currency is a subset of the money and banking category,“ he told Iran Daily.  “Similar plans have been successfully implemented in many countries. If the value of one dollar is 9,000 rials, by eliminating the zeros one dollar will be worth nine rials. This will help augment the value of national currency. Lower value of national currency gives rise to inflation. We need to regularly work for boosting the value of our national currency.“  The lawmaker noted that over 50 countries have implemented a similar plan.  “In the period between the two world wars, Germany saw the wisdom of revaluing its national currency. France, Russia, some Latin American countries, Italy, Afghanistan and recently Turkey are among others that reappraised their monetary systems and lopped off the zeros.“  High Inflation:  Meanwhile, a professor of economics at Alameh Tabatabaei University, Mehdi Taqavi said countries that face hyperinflation embrace the zero-cutting theories.  “Some countries executed this plan after the end of WWII due to the high inflation in the post-war era. For example, Germany replaced the old DM with a new mark. By eliminating six zeros, one million marks overnight were worth one mark. France also eliminated two zeros from its national currency after the war. In Turkey, before the removing six zeros from the national currency, a cup of coffee cost over a million liras, but now it costs one lira,“ Taqavi told the newspaper. He stressed that the Iranian rial does not have a high value in commercial transactions.
“While many countries have eliminated zeros from their national currencies, today we see a similar situation. If three zeros are eliminated from the national currency, we will need fewer banknotes for economic transactions and the Central Bank of Iran (CBI) will be spared from constantly printing money,“ he said.
Underlining that elimination of zeros will have no impact on inflation, Taqavi noted, “Inflation leads to devaluation of money while eliminating zeros makes economic transactions more convenient. The reasons behind galloping inflation should be sought somewhere else. In economic considerations, money is only a tool. With the execution of the plan the cost of economic transactions will reduce.“  He recalled that the reason for printing new traveler checks was that the existing legal tender did not meet the growing public need in financial transactions, and if the zeros are gone there will be no need for traveler checks.  He concluded by saying that the plan for elimination of zeros is more feasible than the plan to change the national currency as proposed by some quarters for a long time.