Iran to redenominate rial in bid to curb inflation

Iran intends to remove three zeros from its currency as the impact of sanctions and inflation hurt its economy.

Iran is to remove three zeros from its currency in a huge redenomination aimed at combating rising inflation.
The figure was published by Irna, the official news agency. The agency also cited Shamseddin Hosseini, the economic affairs and finance minister, as saying Iran aimed to push ahead with devaluing the Iranian rial over the next year.
Currently valued at more than 10,000 rials to the dollar, the Iranian currency has declined in recent years as the country's problems have deepened.
"This shows the dire straits Iran's economy is in," said John Sfakianakis, the chief economist at Banque Saudi Fransi. "I don't think it will help and, if anything, will fuel [problems] further in the medium term."
Past government attempts to steeply redenominate currencies have achieved little success. Zimbabwe's move in July 2008 to cut 10 zeros off its currency failed to arrest hyperinflation.
Plans to wean the Iranian economy off cheap food and energy are contributing to pushing up consumer price inflation. Officials are trying to remove subsidies that have been used to hold down the cost of basic staples.
Inflation edged to 11.6 per cent in February according to official estimates. Many consumers believe real inflation may be much higher. Iran's economy is hurting from tough international sanctions designed to stifle its trade and oil and gas industries. The UN and the EU tightened restrictions against the country last year in a bid to stop it enriching uranium because of fears it is secretly making nuclear weapons.
The currency dropped by about 20 per cent against the dollar in about a week last September. The sharp dip led some analysts to speculate authorities were seeking to devalue the rial by withholding foreign currencies from the market.
The country's central bank has operated a floating system against the dollar for the past decade to try to prevent the currency from falling to an unacceptable level.
The government of Mahmoud Ahmadinejad, the president,insists international sanctions have had no impact on the economy.
 
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