The Iranian President’s chief of staff announced that they are about to remove a zero from the currency. Obviously, it is due to inflation which, at the moment, stands about 40 to 50 percent. Our banknotes have been breeding zeroes for the past 50 years or so and are currently next to inadequate. As an economist, these kinds of policies cannot solve anything and probably could add to the problem by making it less apparent.
There is, however, something more interesting at work. According to the chief of staff, by implementing this policy, the currency will change from Rial to Toman.
Rial is Iran’s official currency. During the past century, a new currency emerged among Iranian people, called Toman. 1 Toman is 10 Rials. In other words, people spontaneously have decided to remove a zero from our currency a long time ago, so in their daily trades almost no one in Iran (including officials) use Rial and the official currency is usually reserved for the financial statements and government budgets and so forth. Even in our legal documents, people use Toman on a regular basis and no one minds the discrepancy. To be clear, for example, a 100,000 Rials banknote is being traded as a 10,000 Toman.
In effect, the establishment is trying to catch up with the rest of the country by recognizing a spontaneous institution and solve some of the inflammatory symptoms while at it.
Probably another pointless program on which countless hours and millions Dollars worth of opportunity cost are going to be wasted but fascinating case nonetheless.
Poor Iran – great people and country ruined by mad mullahs. The Shah looked bad until the Ayatollahs demonstrated the concept of jumping from frying pan into fire.