Iranian rial

Iranian rial. The rial is the official currency of the Islamic Republic of Iran, issued and managed by the Central Bank of the Islamic Republic of Iran. Its subunit is the dinar, though due to low value, dinars are not used in everyday transactions. The currency's value has been significantly affected by international sanctions, domestic economic policies, and high inflation over recent decades.

History

The rial was first introduced in 1798 as a silver coin during the reign of Fath-Ali Shah Qajar, replacing the qiran. The modern rial was re-established in 1932 under Reza Shah Pahlavi, replacing the qiran at par, as part of a broader modernization of the national banking system. Following the Iranian Revolution in 1979 and the subsequent Iran–Iraq War, the currency's stability began to erode. The imposition of international sanctions, particularly those related to the Iranian nuclear program by the United Nations Security Council, the European Union, and the United States Department of the Treasury, has profoundly impacted its value and foreign exchange accessibility.

Coins and banknotes

Coins are issued in denominations of 50, 100, 250, 500, 1,000, 2,000, and 5,000 rials by the Iran Security Printing and Minting Organization, though lower denominations are rarely seen. Banknotes, which feature prominent Iranian cultural and historical figures, range from 10,000 rials to 10,000,000 rials. Current notes depict individuals such as Avicenna, Omar Khayyam, and Fatimah al-Ma'sumah, and are printed with sophisticated security features to prevent counterfeiting. The design and issuance of currency are overseen by the Central Bank of the Islamic Republic of Iran.

Exchange rates and inflation

The rial operates under a multi-layered exchange rate system, with an official rate set by the Central Bank of the Islamic Republic of Iran and a more accessible market rate known on the street. The gap between these rates has often been wide, fostering a vibrant black market for foreign currencies like the United States dollar and the euro. Annual inflation has frequently exceeded 30%, with estimates from the World Bank and International Monetary Fund highlighting severe devaluation, particularly following the reinstatement of United States sanctions after the collapse of the Joint Comprehensive Plan of Action.

Economic impact and redenomination proposals

Chronic high inflation and the low nominal value of the rial have led to repeated discussions about redenomination, often referred to as removing zeros. The Majlis has debated legislation to introduce a new currency, tentatively called the toman, which would be equivalent to 10,000 rials. Such a move, advocated by figures like former President Hassan Rouhani, aims to simplify accounting and daily transactions. However, these proposals have been delayed due to concerns about triggering further inflation, as historically seen in similar reforms in Turkey and Zimbabwe.

Legal status and usage

The rial is the sole legal tender for all domestic transactions within Iran, as mandated by the Central Bank of the Islamic Republic of Iran Act. However, in practice, large transactions, particularly in real estate and automotive markets, are often quoted in toman, a historical unit equal to 10 rials, leading to widespread confusion. The use of foreign currencies for domestic trade is legally restricted, though the United States dollar is commonly used in informal sectors. The currency is not freely convertible internationally due to capital controls and the exclusion of Iran from the SWIFT banking network.

Category:Economy of Iran Category:Currencies of Asia