Coll 28/67 ‘Persia. Annual Reports, 1932–’ [‎35v] (70/644)

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393. The main elements of this plan were incorporated in a law amending
the Gold Standard Law (of the 18th March, 1930) which was passed by the
Majlis with double urgency on the 13th March. The Persian official mind,
however, was not able to bring itself to recognise that the gold standard, which it
so idealised and which in the Persian imagination conferred on the Persian
Government unilaterally the right to collect customs dues on a gold basis, was
altogether a thing of the past. This law, therefore, was used to keep alive t^j
fiction that the gold standard still existed. Gold coins were not only to be struck^
but to be put into circulation, while a suggestion in one article (article 2) that
the Persian Government were introducing bi-metalism was shattered in another
which stipulated that the National Bank, “ pending the return to a normal
economic situation,” was under no obligation to pay out gold (article 10).
394. The total note issue is not to exceed 340 million rials (article 5), or
34 million tomans 10,000 Persian dinars, or a gold coin of that value. , as compared with roughly 13 million tomans 10,000 Persian dinars, or a gold coin of that value. in circulation at
the time the law was passed, and 20 millions in periods of greater trade activity.
The note issue is to be covered to the extent of 100 per cent., but the silver in
circulation, which must amount to not less than 60 per cent, of the notes
(article 6), is to be reckoned as cover. The National Bank is bound to give silver
rials in exchange for notes presented to it in Tehran, but in the provinces it need
only do so within the limits of each branch’s reserve—a clause which aroused a
good deal of criticism.
395. Article 9 prescribes the creation of a Currency Board, but it is to be
entirely composed of Persian Government officials, so that its announcements are
hardly likely to inspire very much confidence.
396. Apart from various absurdities, and viewed from a strictly practical
angle, this scheme appeared to offer an eminently sensible solution to the currency
problem, and it was actually put into practice without the slightest dislocation of
business. The new rial notes, issued by the National Bank, were put into
circulation at the No-Ruz, at first in the smaller denominations only and later in
the larger; they did not go to a discount, as had been generally prophesied. The
withdrawal of the Imperial Bank notes was also effected without a hitch, the
responsibility of the bank ceasing to all intents and purposes when it paid
the Government the face value of all notes which had not been presented by the
13th September.
397. The Persian currency now consists of—
(i) Notes (made in the United States) of 5, 10, 20, 50, 100 and 500 rials.
(n) Silver (minted locally) in coins of 5, 2, 1 and 1 rials.
(iii) Nickel (minted in Germany) in coins of 25, 10 and 5 dinars.
(iv) Copper (minted in Germany) in coins of 1 and 2 dinars.
(There are 100 dinars to the rial.)
Exchange.
398. The change in currency coincided roughly with the freeing of foreign
exchange opeiations by a Bill passed on the 14th February. Control of exchange
derived from exports, however, was retained by the Government. Such exchange
can only be sold to the authorised banks at rates fixed bv the Government, and
the banks can only resell it, at fixed rates, to bona fide importers on production
of import licences.
The immediate result of the lifting of the control was a rise in rates
quoted by the banks from 63 krans to 78 krans to the £, thus coming into line
with the de facto rate at which operations were being done in the bazaar. The
pound again became the basis for all foreign exchange rates after a brief spell
of calculations on the French franc. In consequence the gold surcharge on
specific customs duties (fixed at 20 per cent, in April 1930, when the local currency
depreciated from 50 krans, the rate obtaining at the time of signature of the
Tariff Autonomy treaty, to 60 krans to the pound, and increased to 80 per cent,
m February 1931 when the kran further depreciated officially to 90 to the pound)
was further raised on the 15th February, 1932, to 120 per cent., as the gold pound