Why Did Iran Decide to Remove Four Zeros from the Rial?

Iran’s parliament approved a landmark currency reform as economic hardship escalated for millions of citizens. The bill removes four zeros from the national currency, transforming 10,000 old rials into one new rial, a move designed to simplify transactions and reduce everyday financial complications.

Inflation and sanctions have driven prices sharply higher, making basic purchases a struggle for many people.

The overhaul aims to simplify cash management for households and businesses by reducing the number of zeros on banknotes, receipts, and contracts.

What triggered Iran's currency overhaul?

Iran’s currency crisis reached a boiling point as the rial’s value plunged to around 1,150,000 per US dollar during recent months. Annual inflation surged past 45 percent in September, the highest since May 2023.

The sanctions imposed by Britain, France, and Germany further constrained trade, restricting the country’s ability to stabilize its economy.

The abundance of zeros in the currency made financial calculations cumbersome and complicated, particularly for accounting in shops and public services.

Efforts to mitigate the impact of external pressure and manage inflation led lawmakers to approve the currency reform bill by a 144-108 vote, with the hope that practical improvements would alleviate daily economic burdens.

Did you know?
Iran's previous currency reform attempts stalled in 2019 due to political resistance and technical challenges.

How will the new currency be implemented?

Under the new legislation, the Central Bank of Iran will oversee a three-year transition period. During this transition, both the old and new rials will circulate simultaneously to ensure that the change does not disrupt business or personal transactions.

The new rial will be further subdivided into 100 units called “qirans.” The central bank has been given two years to finalize implementation procedures before the official launch of the new currency system.

Citizens can exchange old banknotes for new ones, and businesses will update accounting and pricing systems to reflect the change. This gradual rollout aims to prevent confusion and maintain continuity across the economy.

What lessons can Iran draw from global precedents?

Countries like Turkey and Brazil have seen positive outcomes after removing zeros from their national currencies, leading to increased market credibility and lower inflation.

Turkey shed six zeros in 2005, restoring confidence in the lira, while Brazil’s 1994 currency reform stabilized its economy through the “Real Plan.”

Not all efforts have succeeded. Venezuela’s removal of five zeros in 2018 and additional cuts in 2021 failed to tame runaway inflation, and Zimbabwe’s multiple redenominations during the 2000s did not halt its economic spiral.

Iranian policymakers are aware that redenomination alone may not solve the country's structural problems or restore its currency's prestige.

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Will Redenomination Solve Iran’s Inflation Crisis?

While the reform is expected to streamline payments and accounting, experts warn that deeper economic issues remain. MP Hossein Samsami argues that the prestige and value of money cannot be improved merely by dropping zeros.

A complex set of factors, including sanctions, supply disruptions, and policy constraints, drives inflation in Iran.

Redenomination may lower printing and maintenance costs for currency, but economists agree that tackling inflation requires broader reforms, such as boosting productivity, restoring trade, and enhancing central bank independence.

Without progress in these areas, the value of the new rial could remain weak in global markets.

What lies ahead for the Iranian economy?

The bill still requires approval from the Guardian Council and President Masoud Pezeshkian’s signature before it takes effect. If implemented, the reform will mark one of Iran’s most significant currency changes in decades.

The policy will be closely watched by citizens, businesses, and international observers seeking signs of economic recovery or further instability.

Iran must prepare for a challenging transition, balancing the practical benefits of a simpler monetary system with the ongoing struggle against high inflation and external pressure.

The effectiveness of the new system will depend on wider political and economic reforms as well as the public’s trust.

Looking forward, Iran faces pivotal choices about restoring stability, opening international trade, and rebuilding confidence in its financial future.

The currency reform, while vital, is only part of a broader effort needed to strengthen the Iranian economy and relieve the strain faced by ordinary people.