What is the IRR (Iranian Rial)
IRR is the abbreviation for the national currency of the Islamic Republic of Iran, the Iranian rial. The rial is made up of 100 dinars. The Central Bank of the Islamic Republic of Iran controls monetary policy. The Iranian rial (IRR) is a controlled currency of the Islamic Republic of Iran.
BREAKING DOWN IRR (Iranian Rial)
The first Iranian rial (IRR) began circulation in 1798 in coin form. It was equal to 1250 dinars. By 1825 the qiran with a value of 1000 dinars replaced the rial coin.
The Islamic Republic of Iran issued the second Iranian rial (IRR) beginning in 1932 which was equivalent to 100 dinars, decimalization of the currency. With decimalization, prices will quote to two decimal places rather than showing a fraction of the whole. The second issue IRR has denominations of 1, 2, 5, 10 and 25 dinars, 1⁄2, 1, 2 and 5 rials. In 1932 the IRR pegged to the British pound at a rate of 59.75 rials to 1 British pound (GBP). Also in 1932 was the Pahlavi gold coins, denominated at 100 rials per a coin. Pahlavi is the ruling party of Iran between 1925 and the 1979 Iranian Revolution.
In 1944, Iran ceased minting all coin denominations below 25 dinars, and in 1953, the minting of silver coins ended. By 1972, the government introduced the 20 rial coin. Iran changed the currency's pegging to the U.S. dollar (USD) in 1945, exchanging at 32.25 rials to one dollar. Iran would later drop the USD pegging in 1975 as relations between the two nations cooled.
After the 1979 Islamic Revolution, the coinage changed, removing the image of the Shah. The value of the currency declined, and capital drained out of the country.
Gradually, larger value rial coins replaced the smaller denominated dinar. The 1, 5, 10, 50 and 100 rials currency began to circulate in 1992, with the introduction of the 500 rials in 2004, and the 1000 rial in 2009. For decades the highest value banknote printed was a 10,000 rial bill. This limit changed with the introduction of the 20,000 rials note in 2003, and the 50,000 rial note in 2007.
The Bank Melli Iran issued the first banknotes of the rial in 1932. The bank issued the notes in denominations of 5, 10, 20, 50, 100 and 500 rials. It was not until 1961 that the Central Bank of Iran took over as the issuer of the paper currency. Current banknotes come in denominations of 2,000, 5,000, 10,000, 20,000, 50,000, 100,000 rials, with the 2000 rial notes having been first introduced in 1986. The 100, 200 and 500 rial banknotes no longer circulate.
The Decline in the Value of the Iranian Rial
In 2012, the Central Bank of Iran tried to specify a fixed exchange rate against the USD. However, the currency continued to fall. In July 2013 the government reduced the amount it subsidizes the Iranian rial/US dollar exchange rate. This removal caused the Iranian rial to devalue to half of its previous value.
And in 2016, the Iranian government announced a plan to replace the rial with the toman. The plan consists of removing one zero from the current rial to introduce the toman as an official currency. In daily Iranian conversation, the "toman," a term for a money which is no longer circulated, often finds use in the quoting of price for goods or services. The toman equates to 10 rials. As an example, a price listed as 10,000 Rials, is spoken of as being "1000 tomans" in general conversation. However, written prices always show the price in rials.
A decline in the rial exchange rate continues today as global pressures and disagreements on the Joint Comprehensive Plan of Action (JCPOA), or the Iran nuclear deal, continue to erode the currency.
According to World Bank data from 2017, the Islamic Republic of Iran experiences 8.1% annual inflation and has a gross domestic product (GDP) of 4.3% per year.
Brief History of Iran
The country, located in Western Asia, was the home to an ancient civilization and continues to be a pivotal point in the regional and global economic and political environment today. Iran boasts a massive oil and natural gas reserve.
Iran had a series of ruling dynasties and monarchs until 1979. The British occupied the western part of the country during World War I which would lead to the founding of the Pahlava dynasty in 1925. During World War II, Iran provided a gateway for American and British aid to the Soviet Union, while it tried to stay neutral. In 1943, Iran received independence, but Soviet troops would not leave until 1946.
In the 1950s, the nationalization of oil reserves and petroleum industry occurred. Ties with the West strengthened, but many were unhappy with what they saw as American interference in the country. The nation coffers filled during the early 1970s as the rise in the price of oil. Foreign investment flooded in and inflation skyrocketed, as corruption in the Iranian government grew.
In 1979 the Islamic Revolution would shake the country, force the Shah Pahlavi from power, and form a new government. The new government declared Iran to be an official Islamic republic in April 1979. Strikes and massive demonstrations paralyzed the country. Regional cultural groups began to rebel meeting with brutal government force. Also in 1979, the U.S. Embassy and 52 hostages were seized with a demand to return of the exiled Shah to face court charges.
The 1980s and 1990s saw a tightening of the government control of the country and the arrest of anyone believed to be a dissentient. Neighbor Iraq attacked the country in a land-grab but was repelled. The government now focused on building businesses and the economy.
In the 2000s, the government worked to shore up the exchange rate of the rial and reduce inflation. At one time, a network of 50 government authorized foreign exchange (FX) dealers attempted to control the foreign rate of exchange of the IRR. The government and Iranian central bank would subsidize buying and selling the currency as the group tried to control the rate. This group managed the availability of the Iranian rial and in an attempt to control the exchange rate. Black market foreign exchange of the IRR is also active and has a different exchange rate from the official rate.