Iran Slashes Four Zeros from Rial in Bid to Save Currency

In a dramatic step to regain public trust in its battered economy, Iran’s parliament has approved a long-discussed plan to remove four zeros from the national currency, the rial, as inflation soars and sanctions bite deeper into the country’s financial infrastructure.

Under the plan, every 10,000 rials will be replaced by 1 new rial, with both the old and new currencies circulating in parallel for up to three years. The Central Bank of Iran has been granted two years to formally launch the currency transformation process, aimed at simplifying daily transactions and easing accounting burdens amid a worsening currency crisis.

The decision, however, still awaits approval from the powerful Guardian Council and the signature of newly elected President Masoud Pezeshkian before becoming law.

This is not the first time Iran has considered such a move. The proposal to redenominate the currency was first introduced in 2019, but was shelved due to escalating economic instability and runaway inflation, which has only worsened in the years since.

The latest parliamentary vote follows a dramatic collapse of the rial on the unofficial market. As of early October, the currency was trading at around 1,115,000 rials to the US dollar, a steep drop from 920,000 per dollar in early August, when the redenomination plan was reintroduced for debate.

This latest plunge underscores the sheer scale of the rial’s depreciation over the past decade, fueled by a combination of international isolation, fiscal mismanagement, and shrinking oil revenues.

While redenomination may provide a psychological lift and streamline cash transactions, economists caution that the move is largely symbolic unless accompanied by broader structural reforms.

“Removing zeros does not remove inflation,” said Dr. Neda Shafiei, an economist specializing in Middle Eastern monetary policy. “Unless Iran addresses its core economic challenges, such as low productivity, sanctions-induced financial isolation, and a lack of foreign reserves, this will remain a cosmetic fix.”

Iran currently faces renewed international sanctions, after the UK, France, and Germany triggered the so-called "snapback" mechanism last month, reinstating punitive UN measures over Tehran’s nuclear program. At the same time, the country is grappling with crippling inflation, which has severely eroded purchasing power and deepened public dissatisfaction.

Ordinary Iranians have seen their savings wiped out and the cost of basic goods soar, making even everyday transactions increasingly cumbersome in cash-heavy sectors.

The redenomination aims to reduce reliance on massive stacks of currency for small purchases, but critics say it does not address the root causes of the currency's collapse, namely, a lack of investor confidence, central bank constraints, and Iran’s continued exclusion from the global banking system.

The move comes as part of a broader economic agenda proposed by President Pezeshkian, who took office earlier this year pledging to stabilize the currency and tackle inflation. However, his government remains limited by international sanctions and domestic political divisions, which may slow or obstruct implementation of reforms.