Iran Approves Plan to Slash Four Zeros from Currency as Sanctions Bite and Rial Depreciates

ERBIL (Kurdistan24) – In a decisive legislative move aimed at grappling with a sharply depreciating national currency and an economy besieged by renewed international sanctions, Iran’s parliament on Sunday approved a sweeping plan to remove four zeros from the rial. The approval, reported by the Iranian Labour News Agency (ILNA), marks a significant turning point in a long-stalled monetary reform effort designed to simplify daily financial transactions that have become increasingly cumbersome due to years of rampant inflation.

According to the ILNA report, lawmakers passed the bill aimed at simplifying transactions just two months after a parliamentary commission revived the proposal. The core of the plan, as outlined by ILNA, dictates that 10,000 current rials will be replaced by one new rial.

Recognizing the immense logistical and psychological challenge of such a transition, the legislation includes a substantial grace period. ILNA reported that both the old and new versions of the currency will circulate simultaneously for a period of up to three years. Furthermore, the central bank has been granted a two-year window to officially launch the transition process.

While today’s parliamentary vote is the definitive legislative action, the framework for this overhaul was solidified recently.

As noted in a previous Kurdistan24 report, the Iranian Parliament's Economic Committee approved the final, revised version of the measure on August 3, 2025. That committee meeting established critical details regarding the new currency's identity and subdivisions.

Despite previous government proposals to change the currency’s name to the "Toman"—a term already commonly used by Iranians in daily commerce to represent 10 current rials—the finalized plan retains the "Rial" as the official name. Instead of adopting the Toman, the committee decided that the new Rial would be subdivided into the "Qiran," with 100 Qirans equaling one new Rial.

The path to this approval has been lengthy and complex. According to background information previously reported, the policy of removing zeros from the currency has been part of Iran's economic discourse since the 1990s. Plans were presented under several different administrations over the decades but never reached fruition until the current crisis forced the issue.

The current initiative was formally submitted as a bill by the government in 2019. It faced a protracted legislative process, which included reviews to address specific objections raised by the Guardian Council.

Shamseddin Hosseini, the head of the Economic Committee, previously confirmed that concerns regarding Iran's obligations to the International Monetary Fund (IMF) had been resolved, with the reasoning that the basis for foreign exchange commitments would not be affected by the domestic currency change.

The impetus for finally pushing the measure through parliament, as highlighted by ILNA today, is the sharp depreciation of the rial as the country grapples with renewed sanctions. The resulting inflation has required citizens to carry large bundles of cash for basic purchases and has complicated accounting and banking procedures with astronomical figures.

However, the move has generated a polarized debate among economic observers in Iran. A previous analysis by the IRGC-affiliated Tasnim News Agency, cited in background reports, detailed a mixture of optimism and profound skepticism regarding the redenomination.

Proponents of the plan argue that the redenomination is a practical necessity that will deliver immediate psychological and logistical benefits. The primary argument favored by supporters is the easing of financial calculations and accounting for both businesses and individuals.

By eliminating the unwieldy string of zeros, the government also aims to reduce the high costs associated with printing, securing, and maintaining vast quantities of banknotes that hold little value. Furthermore, optimists believe that if the redenomination is paired with deeper, substantial economic reforms, it could potentially increase public confidence in the national currency.

Conversely, a significant number of economists have issued stark warnings, characterizing the move as purely "cosmetic." According to experts cited by Tasnim News Agency in previous reports, if this monetary surgery is not accompanied by robust and fundamental measures to control inflation and reform the government's financial structure, its effects will be merely superficial and ultimately ineffective.

Critics argue that without addressing the root causes of the rial's depreciation, the new currency will simply succumb to the same inflationary pressures, potentially creating public confusion and imposing high implementation costs on an already strained system.

The debate within Iran is deeply informed by global experiences with currency redenomination, which offer both models of success and cautionary tales of failure. Economic experts have pointed to these international precedents to emphasize that removing zeros is a necessary, but never sufficient, condition for genuine economic improvement.

Türkiye is often cited as the primary success story. Its removal of six zeros in 2005 succeeded because it was not an isolated act; it was implemented alongside rigorous policies to control inflation and ensure financial discipline, which ultimately stabilized the currency and the broader economy.

In stark contrast, the experience of Zimbabwe serves as a grim warning. Between 2006 and 2009, Zimbabwe made repeated attempts to remove zeros from its currency. These efforts failed completely due to the total absence of accompanying economic reforms.

The result was catastrophic hyperinflation, leading to the eventual abandonment of its national currency altogether. Similarly, Argentina's efforts in the 1980s provided only a temporary positive effect, as the government failed to control its budget deficit, rendering the redenomination useless in the long term.

Drawing from these global lessons, economic experts cited in background reports argue that for Iran's initiative to succeed where others have failed, the policy must be pursued in parallel with firm, undeniable steps toward ensuring financial discipline, enhancing banking transparency, and securing the institutional independence of the Central Bank.

Today’s approval by the parliament initiates the practical phase of this massive undertaking. As the Iranian Labour News Agency reported, the clock has now started on the Central Bank's two-year preparation period and the subsequent three-year phase of dual circulation.

While the explicit goal, as stated by the legislature’s website and reported by ILNA, is "simplifying transactions," the ultimate success of the new Rial will depend less on the number of zeros printed on the banknotes and more on the Iranian government's ability to implement the deep structural reforms necessary to combat inflation amid the ongoing pressure of international sanctions.