Iran’s historic currency crisis is beginning to show serious effects on prices, imports, and utilities.
With internal economic problems accentuated by fears of widespread US sanctions and an American withdrawal from the July 2015 nuclear deal, the Iranian rial broke its historic low of 45,000:1 v. the US dollar earlier this year. Within weeks, it plummeted another 25% to reach 61,000:1.
The Government has been unable to check the slide with a rise in interest rates and arrests of unofficial currency dealers. Two weeks ago, it unified the official and open-market rates at 42,000:1; however, many currency exchanges closed rather than sell foreign currency at the new level, with long lines of people for small amounts of money from official exchange outlets.
Iranian media reported last weekend that the import of vehicles has stopped, as the Iranian Customs Administration announced that the imports dropped 77% in the past month, compared to the same period last year.
Farhad Ehteshamzadeh, an official at the vehicle importers union, said no applications have been registered for his union’s members after the new rate was announced on April 10.
Ehteshamzadeh said the problem has been compounded because the government has not issued any directive to the banks about selling foreign currency to importers.
He also noted that, with the Government declaring a switch from the dollar to the Euro as the official reporting currency, every US dollar will actually cost importers 48,500 rials because of conversion fees.
Mohammad Tahanpour, the chairman of the home appliance importers’ union, said the price of home appliances has risen 7% in the past week. He said that, although there are also other factors, the rising price of foreign currencies is the key factors.
Travel agents have also complained that limitations and ambiguities in the new policy are restricting their business.
The union of electrical industries issued another warning, saying that supply may not be economically viable in the new currency conditions. The outcome will be power cuts and blackouts throughout Iran, the union said.
The union called on the Energy Minister to raise support for 100 of their contracts.
Iran’s leaders continued to put out assurances despite the looming issues. President Hassan Rouhani promised importers to “rest assured as the foreign currency they need would be supplied by the government”.
Vice-President Es’haq Jahangiri added. “The government has taken measures to prevent any rise in the price of essential commodities and medicine.” He said the government will introduce a “unified center to manage foreign currency affairs”, ensuring a stable rate and supply.