Iran to slash four zeros from currency in 2025, chief banker says

Iran will implement a long-delayed redenomination of its national currency this year, Central Bank Governor Mohammad Reza Farzin said on Monday, reviving a plan to strike four zeros from the rial and formally replace it with the toman in a bid to simplify transactions.

"This year, we will definitely pursue the removal of zeros," Farzin told an annual monetary and foreign exchange policy conference in Tehran. "It has been tried in about 70 countries such as Russia, Turkey, and Germany, and proven effective when implemented at the right time."

The announcement marks the clearest signal yet that Iran is moving forward with the redenomination plan first proposed in 2019 and approved by parliament in 2020.

The new currency system would peg one toman to 10,000 rials, aligning official usage with the informal practice already common among Iranians, who long abandoned the rial in everyday transactions.

Farzin stressed that the plan is being accompanied by broader reforms in the banking system, following the ratification of new legislation earlier this year.

"This is a year of transformation," he said. "We are moving from an old model of banking governance to a new one, underpinned by a series of newly approved laws and regulations."

Still, the move comes amid persistent economic headwinds. Iran’s inflation rate has hovered above 40% in recent years, and the national currency has lost more than 95% of its value over the past four decades.

A 10,000-rial note, once worth around $150 before the 1979 revolution, is now valued at less than 10 US cents.

Critics argue that striking zeros from the currency without addressing Iran’s underlying economic challenges—such as fiscal imbalances, monetary instability, and international sanctions—may prove cosmetic.

“The problem is not the four zeros, but the persistent inflation and monetary mismanagement,” economist Jamshid Assadi said in an earlier analysis. “Without reforms to central bank independence, fiscal discipline, and financial transparency, the redenomination will not have a lasting effect.”

Past experiences in countries like Zimbabwe, Venezuela, and Argentina have shown that currency redenominations alone do little to stabilize economies without deeper structural reforms. Conversely, countries such as Turkey and Germany only succeeded after implementing broad fiscal and institutional changes.

Iran’s caretaker Economy Minister Rahmatollah Akrami echoed some of these concerns at the same conference on Monday, warning that limited independence of the Central Bank, unclear inflation-targeting frameworks, and a lack of transparency have all contributed to Iran’s recurring macroeconomic instability.

“The effectiveness of monetary policy tools is limited in the absence of institutional strength,” Akrami said, urging a “redefinition of the Central Bank’s role” within Iran’s economic governance.

The new currency rollout is expected to span up to a few years, during which both the rial and the toman will circulate simultaneously. The Central Bank will oversee the withdrawal of rial notes and coins and their replacement with the new toman units.

While the psychological effect of dealing with smaller numbers may ease some frustrations for the public, analysts warn that without tackling deeper problems—such as rising liquidity, declining purchasing power, and a weakening private sector—the benefits of redenomination will be limited.

As global sanctions continue, not only for Iran's nuclear program, but for the country's human rights abuses and support of Russia's war on Ukraine, the economy is in its worst condition since the founding of the Islamic Republic.

Over one third of Iranians live below the poverty line with unemployment plaguing the population.

“The real question is whether this is meaningful reform—or just another economic shock dressed up as policy,” wrote Iran’s Jahan-e Sanat daily back in 2019 when the reform was first proposed.