What Is the IRR (Iranian Rial)?
The Iranian rial is the national currency of Iran. It was introduced in 1932 and is made up of 100 subunits called "dinars." It is referred to by the code "IRR" by currency traders.
Since 1960, it has been administered by the Central Bank of Iran, also known as the Bank Markazi.
- The Iranian rial is the national currency of Iran.
- It was introduced in 1932 and is administered by the Central Bank of Iran.
- The rial has suffered from severe devaluation, which has only accelerated in recent years.
Understanding the IRR (Iranian Rial)
The modern Iranian rial was introduced in 1932, when it replaced a previous currency known as the qiran. This modern rial was the first currency to follow a decimal system, in which each unit of currency is comprised of 100 subunits.
Prior to this movement toward decimalization, there were many previous generations of Iranian currencies. Some, such as the qiran of 1825 and the rial of 1798, were comprised of 1,000 subunits. Others reflected radically different structures. For instance, the "toman" of 1256 was comprised of 10,000 subunits; the "shahi," introduced in the year 819, was comprised of only 50 subunits.
The history of currency in Iran is especially rich because of the long and vibrant history of that nation, whose roots extend back thousands of years to include ancient civilizations like the Persian Empire.
Since the introduction of the modern Iranian rial in 1932, its value has fluctuated in response to various political and economic factors. Perhaps the most dramatic of these events was the Iranian Revolution, which occurred in 1978 and 1979. This revolution, which resulted in the overthrow of the monarch and the installation of Ayatollah Khomeini as the Supreme Leader of Iran, helped precipitate a period of severe currency devaluation.
Today, the Iranian rial is subject to tight exchange controls designed to limit the outflow of money from the country. In 2012, the Central Bank of Iran tried to maintain a fixed exchange rate against the U.S. dollar (USD), even expending significant resources to subsidize the Iranian rial in order to maintain that exchange rate. These efforts were largely abandoned in July 2013, however, resulting in a nearly 50% devaluation of the Iranian rial. These ongoing struggles have been further compounded by the existence of economic sanctions against Iran.
Oftentimes, there can be a substantial difference between the rial's official exchange rate as compared to the various black market exchange rates that exist in the country. For instance, the official exchange rate in 2018 was 42,000 rials per USD. However, the estimated black market exchange rate was 135,000 rials per USD for that same year.
Real World Example of the IRR (Iranian Rial)
The Iranian rial has been plagued by severe inflation over the past decade, average nearly 20% between 2008 and 2018. Meanwhile, the nation's economy has struggled to grow, with Iranian gross domestic product (GDP) rising at a compound annual growth rate (CAGR) of barely 2% over that time frame.
Moving forward, the Iranian government is reportedly considering replacing the rial with a new currency called the toman. The word "toman" is already familiar to users of Iranian currency, because it was the name of a currency used between 1256 and 1588 and continues to be used colloquially as a shorthand term when quoting prices for goods and services.