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Iran to change its currency to ‘Toman’

Iran plans to cut four zeros from its existing currency ‘Rial’ and adopt new currency ‘Toman’.

May 8, 2020 13:28 IST
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Iran is going to change its currency from existing ‘Rial’ to ‘Toman’. The Iranian lawmakers voted on May 4, 2020 to approve an amendment to Iran’s Monetary and Banking Act of Iran to make the change.

The amendment bill will cut four zeros from Iran’s currency. Toman, the new currency is equal to 10,000 rials. The move follows a sharp fall in the value of Rial as a result of crippling US sanctions.

The new bill, however, will need to be approved by the clerical body that vets legislation before it comes into effect. 

Key Highlights

•  The Central Bank of Iran will have two years to change Iran’s currency to Toman. This means that the existing currency of Iran will continue to remain legal tender alongside "Toman" for two years. 

•  During this period, the old coins and bills will be gradually collected to replace them with new ones.

•  The new currency has been introduced amid the sharp fall in the value of Iranian currency as a result of crippling sanctions imposed by the United States. 

•  The Iranian currency was trading at around 156,000 rials per USD at the unofficial market on May 4, as per foreign exchange websites.

Significance

Iran has reportedly decided to change its currency to offset the fallout from inflation triggered by US sanctions. According to economic experts, however, the move has nothing to do with the inflation rate but is a neutral plan that will not impact the value of the country’s currency or commodities.

Background

Iran had been mulling over the idea of cutting four zeros from its currency since 2008. However, the idea gathered steam after 2018 when US President Donald Trump announced the US exit from the 2015 nuclear deal and imposed heavy sanctions of Iran, accusing the nation of continuing its nuclear activities and not following the terms of the deal.

Iran’s currency, Rial, lost more than 60 percent of its value following the sanctions. Iran’s weak currency and high rate of inflation had led to street protests.

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