Iran is experiencing a financial crisis as its currency, the rial, has dropped to unprecedented levels over in recent months.
Over the last two weeks, the currency’s value against the US dollar dropped by 10,000 rials, with the currency reported by Forbes to be trading freely against the dollar during week ending April 14 at around 60,000 rials.
“There is a clearly an increase of people buying dollars because they think the United States will pull out of the nuclear deal,” the head of an exchange office in Tehran told Agence France-Presse on condition of anonymity.
One of the principal concerns driving the rial’s collapse is the growing gulf between the official rate, 37,814 before government intervention April 9, and the global rate. Attempts to fuse the two rates have been hard to carry out and inflation remains a significant risk. “The government can’t do anything when there is this much panic. If the United States exits the agreement, the Iranian currency could collapse even further and reach 70,000 to the dollar,” the exchange dealer said.
To check the rial’s fall, officials stated that, from April 10, the government would sell the dollar at a rate of 42,000 rials. Government officials said they hoped the move would combine Iran’s official and open-market exchange rates.
Attributing the rial’s fall to the “enemies” of Iran, First Vice-President Eshaq Jahangiri, after an emergency cabinet meeting April 9, that trading at any rate other than 42,000 rials for a dollar would be considered “contraband” and dealt with “severely.”
Jahangiri blamed “non-economic, unjustified and unpredictable factors” for driving the rial’s collapse. He confirmed that tens of billions of dollars’ worth of foreign currency entered Iran in recent weeks via export revenues.
“It’s natural that our enemies and opponents, especially the Americans, after the nuclear deal was agreed and after [US President Donald] Trump took office, have made great efforts to try and present Iran’s economy as turbulent and try to discourage anyone from working with Iran,” Jahangiri said.
Trump has threatened on numerous occasions to walk away from the deal and reimpose US sanctions by May 12, the next deadline for affirming US support, unless restrictions are placed on Iran’s nuclear and missile programmes and the republic reins in its overseas activities. In October, when the US president first mooted walking away from the nuclear deal, the rial stood at 40,000 to the dollar but it has fallen steadfastly since. In February, Tehran began arresting unlicensed traders and froze the accounts of speculators. The rial still continued its dramatic decline.
Iranian President Hassan Rohani, who has made reviving the economy and re-establishing ties with the West central pillars of his platform, has downplayed the rial’s fall, reassuring a nervous public that oil sales provide Iran with plenty of revenue.