What Is the Iranian Rial (IRR)?
Let me explain the Iranian Rial, or IRR, which is the currency abbreviation and FX symbol for Iran's official currency. Named after the Spanish real, it first appeared in 1798 and is issued and managed by the Central Bank of the Islamic Republic of Iran. You should know this as the foundational currency for all transactions in Iran.
Key Takeaways
- The Iranian rial (IRR) is the national currency of the Islamic Republic of Iran.
- While the rial is not officially pegged to another currency, its exchange rate stabilized at around 42,000 IRR per U.S. dollar beginning in April 2018.
- Iran's economy is largely based on petroleum refining and exports, but economic sanctions due to its nuclear program have stifled its position as a player in global finance and trade.
- IRR is sometimes considered to be a blocked or inconvertible currency since it is not freely traded on the global foreign exchange market.
- There has been discussion and legislation in Iran to replace the rial with the toman, though this has not happened as of 2023.
Understanding the Iranian Rial (IRR)
One Iranian rial consists of 100 dinars, but those dinars hold no practical value due to their minimal worth. Locally, you'll see the IRR represented by the Arabic symbol ﷼. As of December 2023, one U.S. dollar equals roughly 42,023 IRR. I want you to note that while the rial was introduced in 1798, a different currency called the qiran was in use from 1825 to 1932, and the rial was reintroduced in 1932. Its value dropped significantly after the 1979 Islamic revolution.
Iran holds a key position in OPEC, with much of its government budget coming from oil sales. Banknotes come in denominations of 100, 200, 500, 1,000, 2,000, 5,000, 10,000, 20,000, 50,000, and 100,000 rials, and coins are available in 50, 100, 250, 500, 1,000, 2,000, and 5,000 rials. Remember, a stable exchange rate helps prevent capital flight, keeping investment from leaving the country for better returns elsewhere.
The IRR isn't pegged to the U.S. dollar or any other currency, operating as a free-floating rate, but Iran's central bank uses controls to maintain stability. Reports suggest Iran might be developing regulations for bitcoin and other cryptocurrencies, which could impact its financial landscape.
The Iranian Rial (IRR) Convertibility
Since the early 2000s, the IRR exchange rate has varied from about 1,750 IRR to one USD up to 44,070 IRR to one USD. However, exchanging the rial for U.S. dollars isn't straightforward. Tensions between the U.S. and Iran, including long-standing sanctions and trade restrictions, stem from Iran's nuclear ambitions and alleged support for terror groups.
Price controls, subsidies, and rigid policies burden the economy, with widespread corruption adding to the issues. This makes the IRR a non-convertible currency, meaning it's not freely traded on global forex markets. Iran's GDP stood at $366.44 billion in 2023, projected to reach $386.22 billion in 2024.
If you're an offshore investor dealing with non-convertible currencies like the IRR, you'll need to use non-deliverable forwards (NDFs). These instruments settle net cash flows in a convertible currency like the USD, bypassing the non-convertibility without physical exchange of the local currency. NDFs are typically short-term forward contracts settled in cash.
The Iranian Rial vs. Toman
Even though the rial is official, Iranians commonly use the toman, where one toman equals 10 rials. In 2020, talks emerged about replacing the rial with the toman due to inflation eroding the rial's value against the dollar. Under this plan, one toman would equal 10,000 rials, effectively removing zeros from the currency. Parliament passed measures for this change, but as of late 2023, the rial remains the official currency.
Frequently Asked Questions
Which countries use the Iranian Rial? Only Iran uses it as its currency. How do you calculate the Iranian Rial exchange rate? Use a currency converter like the one on XE.com; select the rial and your desired currency to get the rate. Why is Iran’s Rial so weak? It stems from political instability, an authoritarian regime, accusations of supporting terrorism leading to sanctions, and heavy reliance on oil exports, which suffer when prices drop or sales are restricted. What is the Rial to Toman exchange rate? One toman equals 10 Iranian rials.
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