Iran Central Bank's redenomination policy ambitious: economist
Tehran, Iran, Jan. 8
Iran's policy to redenominate four zeros from national currency has moved forward to another stage of becoming operational, while economists believe the plan will have heavy effect on the country's economy.
"Redenomination of four zeros from national currency can lead to inflation cuts only when the value of national currency is high due to production rise, GDP growth and high employment rate that also depend on other factors," Iranian economist Mahmoud Jam-Saz told Trend.
The expert believes redenomination has no impact on inflation rate; however it will create psychological effects and possibly a rise in living costs.
"Launching this project to change the bills and coins will costs thousands of millions of dollars; this decision is to be implemented during a sanctions situation and a lack of resources alongside a $952.3 million budget deficit prediction, in addition to US blocking Iran's foreign currency resources and a prediction of $54 oil price," he added.
The economist thinks the Central Bank of Iran's decisions are ambitious and optimistic, while the sanctions situation is even worse than in Ahmadinejad's presidential term, so it seems the situation is not suitable to run this project.
"Redenomination is only a nominal change and it is not certain if it can decrease the inflation rate," he added. "Although the inflation rate is not openly announced and the government said it is at 25 to 37 percent, the International Monetary Fund (IMF) reports indicate 40 percent for Iran's inflation rate and predict its rise next year."
"Another problem in this project is calculating items with low prices, such as matches with a 1,000 rials price. How does redenomination of four zeros affect them? It is possible the government will mint coins that will have heavy costs and confuse people," Jam-Saz added.