Dollar Rate Widens Rift between Government, Iranians

Dollar Rate Widens Rift between Government, Iranians

Wednesday, 14 February, 2018 - 10:15
Long queues lined up in front of currency exchange offices, banks and gold markets in Iran last week, due to concerns about the depreciation of the national currency. (AFP)
London - Adel al-Salmi
Political turbulence once again fell into the court of Iranian President Hassan Rouhani as the value of the national currency fell to its lowest levels, registering 5,000 Iranian tomans for a dollar.

This represents a drop of 60 percent since the imposition of sanctions in 2007, compared to 36 percent last year. Iranians queued in front of currency exchange offices to buy dollars despite the central bank’s assurances that the economic shock caused by the dollar’s skid was being contained.

Dollar rates have affected the local currency amid fierce criticism facing the Rouhani government from conservative opponents and non-state actors over its economic policy. Iranian people have been disgruntled over the “delay in tasting the fruits of the nuclear deal” that was signed in 2015.

Trying to muzzle public outrage, the government tried to calm the street by asserting that current gold and dollar lows were unrealistic and would return to their previous levels. Government spokesman Mohammad Reza Nobkhat said banks were in control of the market, denying rumors of a decline in financial reserves.

He added that the government “does not succumb to the fluctuations of the currency market.”

During his press conference a week ago, Rouhani denied that the government had any role in meddling with local dollar exchange rates, stressing that it “did not face a budget deficit”.

Without delving into detail, he advised Iranians against risking working in the currency market and pointed to non-economic factors standing behind the fluxes.

The dollar has risen 25 percent since the beginning of December. It has also risen by about 36 percent in 12 months, and has been up about 60 percent since 2007.

Despite government reassurances, the local market movement went unaffected as Iranian citizens “did not pay much attention" to Rouhani’s speech, said a number of local economic analysts.

Market prices continued their upward trend, discrediting Rouhani’s attempts to reassure citizens that the crisis would end within days.

Iranian news agencies reported long queues lining up in front of currency exchange offices, banks and gold markets last week, due to concerns about the depreciation of the national currency.

In September, the government decided to cut bank interest rates, leaving some $20 billion of funds out of banks. The government tried to invest funds to stimulate the stock market and the production sector, but the weakness of economic policies, market volatility and the plummeting Iranian currency inhibited investment.

As a result, the majority of funds out of banks tended to market the dollar and gold as alternatives to investment in light of the sharp decline in the value of the toman.

Rouhani’s government faces accusations that it is not serious about countering the dollar's rising rates-- instead, some accused it of being the main beneficiary of spiking prices-- selling its dollar and gold reserves to markets at high prices to mitigate budget deficit.

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