Background on the Iranian Rial and Recent Economic Challenges
The Iranian rial has been in a continuous decline since the United States withdrew from a nuclear agreement in 2018, reinstating international sanctions against the Islamic Republic. These economic pressures have led to a devaluation of the currency, prompting Iran’s parliament to take action.
Parliamentary Commission Approves Currency Reform
On Sunday, the economic commission of Iran’s parliament approved a draft law aiming to eliminate four zeros from the national currency. This move seeks to address the ongoing depreciation of the rial due to international sanctions, as reported by a state-run media outlet.
According to Icana, the parliament’s website, Shamsedin Hoseini, president of the commission, announced the approval. The proposal was initially introduced in 2019 but was later abandoned.
Details of the Proposed Currency Reform
Under the proposed law, a new rial would be worth 10,000 current rials. The central bank governor, Mohammad Reza Farzin, had previously stated in May that the Iranian rial “does not have a favorable image” on the global economic stage.
The reform must undergo a parliamentary vote and receive approval from the Guardian Council, an organization responsible for examining laws.
Impact of the Currency Devaluation
In recent years, the rial has continuously lost value following the U.S. withdrawal from a nuclear agreement in 2018 and the subsequent reimposition of sanctions on Iran. The situation worsened with Donald Trump’s return to the U.S. presidency.
As of Sunday, one U.S. dollar was trading at 925,000 rials in the black market, compared to 913,500 the previous day, according to the economic daily Donya-e Eqtesad.
Key Questions and Answers
- What is the proposed currency reform in Iran? The Iranian parliament’s economic commission approved a draft law to eliminate four zeros from the national currency, aiming to address its continuous depreciation due to international sanctions.
- Why is the Iranian rial losing value? The devaluation of the rial is primarily due to the U.S. withdrawal from a nuclear agreement in 2018, which led to the reimposition of international sanctions against Iran.
- What are the next steps for this proposed currency reform? The draft law must undergo a parliamentary vote and receive approval from the Guardian Council before implementation.
- How has the black market reacted to the rial’s depreciation? In response to the continuous decline of the Iranian rial, one U.S. dollar was trading at 925,000 rials in the black market as of Sunday.
