In a drastic move to counter a collapsing currency and soaring inflation, Iran’s parliament has approved a plan to remove four zeros from the national currency, the rial. This long-debated measure is a direct response to the rial’s precipitous decline, which has accelerated following the reimposition of international sanctions.
Parliament Approves Currency Overhaul
On Sunday, the Iranian parliament (Majlis) passed a law to redenominate the national currency by effectively creating a new “tooman.” Under the new law, one new tooman will be equal to 10,000 current rials. The bill, which had been shelved for years, was revived by the parliament’s economic committee just two months ago. According to the parliament’s website, the primary goal is to “facilitate transactions” by simplifying a pricing system currently burdened by astronomical numbers.
The legislation stipulates that both the old rials and the new toman will remain in circulation for a transition period of up to three years. The Central Bank of Iran has been given a two-year deadline to begin the logistical process of changing the currency.
A Currency in Freefall
The urgency of the move is underscored by the rial’s continued plunge on the unofficial market. The currency has repeatedly hit record lows against the U.S. dollar in recent days, a trend that black market observers directly link to the return of United Nations sanctions.
This sanctions snapback was triggered in late August by the European Troika (Britain, France, and Germany) using the “snapback” mechanism outlined in the 2015 nuclear deal. This mechanism allowed for the reinstatement of international sanctions after the U.S. withdrawal from the accord. The rial’s value has deteriorated sharply since then; while the U.S. dollar was trading at around 920,000 rials in early August when the bill was revived, it now trades at approximately 1.115 million rials.
From Rial to Toman: A De Facto Change Becomes Official
The plan to redenominate the currency was first proposed in 2019 but was subsequently withdrawn. The current approval by parliament is a significant step, but the bill must still be ratified by the Guardian Council—the body responsible for reviewing legislation for constitutional compliance—and signed by President Masoud Pezeshkian before it becomes law.
The shift to the toman effectively formalizes a practice Iranians have adopted for years to simplify daily calculations. By convention, many already quote prices in “tomans,” which is equivalent to dropping one zero from the rial (1 toman = 10 rials). The new law makes this official but on a much larger scale, removing four zeros in total.
Inflation Bites and the Deepening Poverty Crisis
The economic crisis is acutely felt by ordinary Iranians. The trigger mechanism’s activation and the return of UN Security Council sanctions have caused the dollar’s value in Iranian markets to skyrocket. By the end of last week, the U.S. dollar hit a record high of 118,000 tomans in Tehran. This rapid devaluation has had an immediate and severe impact on the prices of consumer and food goods, with most products seeing unprecedented price jumps.
Official statistics from the Iranian Statistical Center for September show an annual inflation rate of 37.5%, with the point-to-point annual inflation rate at a staggering 45.3%. However, many independent economists insist these official figures do not reflect market reality due to the weighting methods used for consumer baskets. They maintain that the true inflation rate is significantly higher.
The widening gap between income and the cost of living is becoming a chasm. According to the latest official data, the average monthly income for Iranian workers and employees is between 12 and 17 million tomans (approximately $101 to $145). Meanwhile, labor activists assert that the poverty line for a family of three has now surpassed 56 million tomans (about $475) per month.
A Bleak Outlook
All indicators suggest Iran’s economic situation will worsen in the coming weeks and months. The full reinstatement of sanctions, plummeting oil revenues, and increasing financial isolation are expected to place additional immense pressure on the domestic market.
Under these conditions, not only will the prices of essential imported goods rise, but the cost of local and agricultural products is also expected to increase daily. This will likely deepen the gap between the minimum wage and the poverty line to a much more severe level, pushing more of the population into economic hardship.
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