Iran CBI monetary policy reforms - part.1

Over the past two weeks, Iran has advanced its monetary policy restructuring by moving forward with a significant currency reform. On August 11, 2025, the Iranian government, led by reformist President Masoud Pezeshkian, approved a draft law to remove four zeros from the national currency, the rial. This measure, known as redenomination, involves replacing the old rial with a new unit of lesser nominal value, aiming to simplify transactions and enhance financial efficiency. The new rial will be subdivided into 100 gherans, restoring an old currency subdivision. The reform has been approved by a parliamentary committee and is expected to be formally enacted following approval by the Guardian Council .

Despite the approval of the currency reform, experts caution that the move may be largely symbolic without accompanying structural economic reforms. The Iranian economy continues to face challenges such as high inflation, fiscal deficits, and a reliance on oil revenues. Analysts argue that the removal of zeros addresses the symptoms rather than the underlying causes of economic instability. For instance, economist Kamran Nadri noted that the reform is "neither an effective monetary policy nor a mechanism to control inflation," but rather a formal adjustment to the currency unit for accounting purposes .

In addition to currency reform, Iran's Central Bank has been adjusting its policy rates. As of March 2025, the Standing Lending Rate reached a record high of 24%, indicating the central bank's efforts to tighten monetary policy in response to inflationary pressures. However, the effectiveness of these measures in stabilizing the economy remains uncertain, as they may not address deeper structural issues. The combination of currency redenomination and policy rate adjustments reflects Iran's ongoing attempts to reform its monetary system, though the success of these efforts will depend on broader economic and political reforms .