Inflation-hit Iran to lop zeros off currency

NEW BILLS: A man holds bills of the newly issued Iranian 500,000-rial (35-euro) in Tehran on August 21. (AFP)

Iran is to lop several zeros off its currency as it battles double-digit inflation, Central Bank vice president Hossein Ghazavi said in comments published on Thursday.

"A special committee has been formed within the central bank to prepare the currency reform and the suppression of several zeroes," the financial daily Sarmayeh quoted Ghazavi as saying.

"A 10,000 rial note has the same purchasing power now as 25 rials 30 years ago," he said.

The rial trades at 9,650 to the dollar now against just 70 at the time of the 1979 Islamic revolution.

Ghazavi set no date for the currency reform and did not specify how many zeros the rial would lose although the design of new high-denomination notes that the Central Bank has issued in recent weeks has prompted speculation that it will probably be four.

The 500,000 rial and one million rial notes carry the figures 50 and 100 on their backs. A two million rial note is to follow.

The Central Bank says the new notes are not banknotes although they are legal tender just as if they were.

They were introduced to replace the array of high-denomination promissory notes which private banks had been issuing to enable their customers to carry out large transactions and which are now banned as the central bank has moved to reassert control over the money supply.

Ghazavi said another aim of the new notes was to "get the public used to handling high value notes... before issuing higher value banknotes."

The Central Bank has been eager to reassert its control of the money supply after annual inflation hit 26 percent in June.

The expansionary economic policies of President Mahmoud Ahmadinejad have drawn criticism from reformers and conservatives alike for stoking the rise in prices.

Last week, supreme leader Ayatollah Ali Khamenei warned the president to rein back his plans so as not to further aggravate the problem.

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