AFP: Iran is examining a proposal to knock three zeros off its national currency to increase economic confidence and reduce the number of banknotes, the central bank governor said on Tuesday.
TEHRAN, Sept 11, 2007 (AFP) – Iran is examining a proposal to knock three zeros off its national currency to increase economic confidence and reduce the number of banknotes, the central bank governor said on Tuesday.
However new central bank chief Tahmasb Mazaheri said the suggested revaluation would need to be carefully studied before it could be implemented.
“This is at the suggestion phase,” Mazaheri said, according to the IRNA news agency.
“In carrying out the preliminary studies we have to accurately evaluate the uses of this work and necessary measures taken for compensating any losses,” he added.
Iran’s economy has been hit by considerable inflation over the past 20 years, meaning that 10,000 rials (the main currency unit) is now worth less than one dollar.
The exchange rate of the rial to the dollar has soared from 70 rials to the dollar at the time of the Islamic revolution in 1979 to more than 9,300 rials today.
Paying for more expensive goods and services in Iran can thus involve handing over unwieldy bundles of cash. Every Iranian citizen holds at least 114 banknotes at one time, compared with 10 to 12 for a European, figures show.
Iran’s neighbour Turkey, which has recovered from a major economic crisis in recent years, in 2005 lopped six zeros off its national currency to create New Turkish Lira and facilitate cash transactions.
The proposal came from lawmaker and member of parliament’s economy commission, Gholam Reza Mesbahi Moghaddam, who said “practical and psychological” problems had been created by the fall in value of the Iranian currency.
IRNA said that President Mahmoud Ahmadinejad had told the central bank last week to “work thoroughly” on the issue.
“The deletion of three zeros from the national money is a method which could be useful, but first the ground should be prepared and the people need to be told why this is being done,” said Mazaheri.
Ahmadinejad has been criticised by economists for stoking Iran’s double figure inflation himself by ploughing money from high oil revenues into infrastructure projects and causing a a spike in money supply growth.