By: Mir M.Hosseini
Iran's economic situation was not bright even before the occupation. After the invasion of Allied Powers, food and other resources became scarce and the occupiers were imposing trade treaties that were against Iran's welfare. According to the trade and finance treaty signed on May, 26, 1942, the British undertook sending bare necessities to Iran while Iran accepted to provide necessary Iranian currency that was needed for expenses of the British troops. The exchange rate for a British Sterling was set as 128 Rials while %40 of payments to Iran could be converted to gold. Iran also guaranteed not to pay in gold except for U.K., Canada, and U.S. transactions.
During the WWII, the Iranian Rial in circulation rose up 70 times causing a %700 inflationary effect. The parliament passed several bills to publish banknotes which were initially ordered from London. On June, 26, 1943 the U.S. and U.K. accepted to pay Iran in gold to lift a huge monetary load on the Iranian economy that had forced the government to sell some of the silver and diamonds in treasury.