Tehran, Iran, Jan.8
Trend:
Proposals in Iran to remove four zeros from the national currency have been floating around since 2008, but the idea gained more strength as rial lost more than 60 percent of its value in 2018, despite some recent attempts, engineered by the country's Central Bank amid the US sanctions.
Iran's Deputy Trade Minister said that such policies are nominal changes.
"The main function of removing 4 zeros from national currency is to simplify calculation and reduce the transaction confusion. It does not have a major positive economic impact,” Iran's Deputy Trade Minister and Economic professor at Allameh Tabatabaie University, Ali Sarzaeem told Trend.
"When I say that these changes are nominative, it means that implementation of such policy is like calling a chair a table; which does not change the nature of the table or the chair," he said.
On the other hand, Saezaeem said that removing zeros can have an inflationary effect, adding that the re-denomination policy was implemented as a response to hyperinflation.
The official said that re-denomination is implemented by countries whose economies have stabilized, but in his opinion, Iran isn't on that stage yet.
“The sole function of re-denomination and removing zeros from national currency is to make calculation easier. Now, there are no products in the country that cost below 10,000 rial, thus by eliminating 4 zeros, the numerical calculation will be easier,” he explained.
“On the other hand, the currency changes from Rial to Toman is efficient. Rial made transactions too difficult, thus is will be changed through this policy. From this perspective, this action is right, but the timing isn't,” he added.
Saezaeem believes this should be done once and for all, but in a more appropriate situation where economic stability has been created, especially if the people see this policy as the government`s ignorance about the fundamental problems.
"It may create an excuse for critics to attack the government`s efficiency," he said.
Referring to the psychological impact of re-denomination among citizens, Saezaeem said that people are wiser, and won't be fooled by such policies.
"There is no place in the world, where such changes as removing zeros from currencies or renaming of currencies have psychologically affected people. This policy has no psychological impact on people," said the official.
Pointing to the impact of re-denomination policy on the exchange rate, he said that this policy is not effective in reducing exchange rates.