Iran doubles highest banknote amid inflation fears

High inflation in recent years prompted Iran to create the new banknote

Iran has doubled the denomination of its highest banknote to 100,000 rials ($10, £6.50), its Central Bank Governor Mahmoud Bahmani has announced.

At least 150 million notes are being printed and distributed over the next three months, he told Mehr news agency.

The move has been prompted by high inflation, although official figures say the rate has fallen to 10% from a peak of 29% in 2008.

Mr Bahmani said the new notes should be used in place of travellers' cheques.

The special travellers' cheques, which local banks issue, can each be worth up to 2m rials.

Kamran Dadkhah, an associate economics professor at Boston's Northeastern University, said "astronomical" inflation in Iran in recent years had necessitated the new notes.

"They have to print notes in larger denominations, otherwise people will have to take a sack of them to buy a sandwich," he told Bloomberg Businessweek magazine.

The Iranian government has previously said it would start reducing food and fuel subsidies later this year, in a move critics fear could fuel inflation and spark protests.

The government says Iranians in lower income brackets will receive cash payments to help them cope when the cost of items such as bread and gasoline increase as a result of the gradual removal of the subsidies over a five-year period.