Government measures appear to be failing with 10% drop in rial since Sunday morning


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UPDATE 1500 GMT: At the close of business, the rial is at 130,000:1 v. the US dollar, a drop of about 18% in the past two days.

UPDATE 1130 GMT: The rial has fallen further. At 3 pm Tehran time, it stood at 126,500:1 — a 15% fall since Sunday morning.

Iranian English-language media is not reporting on the development, and conservative site Tasnim is behind: it has the rate at 115,500:1.

Iran’s currency is sinking again, reaching an all-time low on Monday morning.

The rial is now at 120,000:1 v. the US dollar, a drop of 10% in just over 24 hours. The previous low was 119,000:1 in late July, before a series of Government measures to try and halt the slide.

With Iran’s economy beset by a combination of long-term internal problems and expanding US sanctions, the rial has sunk more than 70% against the dollar since January.

The Rouhani Government has tried raising interest rates on savings, switching the official reporting currency to the Euro, and setting a unified official rate of 42,000:1, while authorities have arrested “economic corruptors” and unofficial currency dealers, threatening them with public trials and sentences that cannot be appealed.

Last month, the Government replaced the head of the Central Bank and restructured the foreign exchange market, abandoning the unified rate. The steps brought a brief recovery of the rial to 95,000:1; however, the currency soon slipped before the sharp drop of the past day.

The devaluation is adding to Iran’s difficulties with production, trade, employment, and investment. Inflation, which had been reduced to single digits from more than 40% in 2013, is rising — especially on essential goods.

The Iranian Parliament’s Research Center is now forecasting a sharp downturn into recession, with a GDP loss of between 3.8% and 5.5% in the next Iranian year from March 2019.

Iran’s economy grew 3.7% between March 2017 and March 2018.

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Addressing commanders and officers at an airbase on Sunday, the Supreme Leader made no reference to the latest economic shock.

Instead, Ayatollah Khamenei said that, even though there is no possibility of a war on Iran, “The Armed Forces must upgrade their human and military hardware capabilities on a daily basis through vigilance as well as efficient and dynamic management.”

Speaking at Sunday’s Cabinet meeting, President Hassan Rouhani did not specifically mention the currency as he told Ministers to implement the Supreme Leader’s guidelines: “It is imperative to act in a way that after a short time span, we can present a report to him on what we have done in this regard.”

Rouhani cited increased privatization and full support of the private sector; banking system reform, with management of liquidity in the economy; and regional cooperation.