Economist talks pros & cons of Iran's currency revaluation

Business Materials 17 April 2019 15:45 (UTC +04:00)

Baku, Azerbaijan, April 17

By Elnur Baghishov – Trend:

Preventing the increase of liquidity and increasing production in Iran can lead to a decline in inflation, Shahriyar Zarvaki, Iranian economist and member of the scientific staff of the University of Mazandaran, told ISNA, Trend reports.

According to Zarvaki, more than 70 countries have carried out programs for cutting off extra zeros from their national currency, with some having successful results, and some failing to meet the set goals.

He added that succeeding in removing zeros from the currency depends on price stability, as well as the level of inflation and the management thereof.

Noting that the elimination of zeros from the national currency will not affect the inflation in Iran, the economist said that the solution of the problems faced by the Iranian economy lies not so much in cutting off zeroes and related issues, but in actually increasing in the value of the national currency and making it competitive in the global market.

“Although the consumption of banknotes per capita of the Iranian economy exceeds the global average by several times, cutting off zeros (according to statistics) will neither lead to a reduction in the said figure, nor will it reduce the cost of issuance of banknotes,” he noted.

One of the benefits of cutting off zeros from Iran's national currency is the psychological effect it will have on the population, Zarvaki said, and this will create an illusion of less money being spent on sales and purchases.

Another benefit, according to the economist, is in the simplification of accounting transactions. Removing zeros can help better process large figures, such as those for budget and other national financial calculations.

The economist stated that it is not economically profitable to issue new banknotes while collecting and disposing of old banknotes at the same time, adding that such a large-scale change can cause instability in financial institutions.