The Iranian 50,000 rial note (pictured) is the country’s highest-denominated banknote and was launched earlier this year. (STR/AFP/Getty Images)
Iran's central bank has been instructed to study the possibility of knocking three zeroes off the country's banknotes, whose value has been eroded by double-digit inflation, Iranian media reported on Monday.
The oil-rich Islamic Republic early this year launched its highest-denominated banknote yet, 50,000 rials or the equivalent of around $5.40. Previously, the largest note in circulation was worth 20,000 rials.
Gholamreza Mesbahi-Moqadam, a member of parliament and a member of the policy-setting Money and Credit Council, was quoted as saying President Mahmoud Ahmadinejad had ordered the central bank to look into the issue.
"Our biggest banknote is very weak against other countries' currencies and this brought a bad feeling among our people in psychological terms," Mesbahi-Moqadam told Fars News Agency.
"Iranian pilgrims who used to go to Mecca for the Haj could exchange 10,000 rials for 500 Saudi rials but now they only receive four Saudi rials," he said.
He said the present situation also wasted time both for banks and their clients in handling and counting wads of money, as well as increased the cost of printing new banknotes.
Iranian media said the issue had been on the agenda in 2005 but was opposed by then Central Bank Governor Ebrahim Sheibani, who was replaced by Ahmadinejad last month.
The Central Bank was not available for comment.
Another Iranian news agency, Mehr, said it could take two years to implement the change, if it was approved.
Economists say profligate spending of Iran's oil revenue is helping to stoke inflation, now running at a year-on-year rate of over 17% but the government says the problem has been exaggerated and that price rises are under control.
Ahmadinejad came to power in 2005 on a pledge to distribute Iran's oil wealth more fairly, but his economic policies face growing criticism from the public, the media and economists for failing to cut double-digit inflation and jobless rates.
Source: ArabianBusiness.com
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