Iran rial plunges to record low

The slide of Iran’s rial, which tumbled to a record low against the dollar on Tehran’s streets Monday, has intensified criticism of the government’s management of the currency. The rial, which has declined in value over the past year, dropped about 18 per cent in a single day Monday, reaching 35,000 to the dollar on the unofficial market. The currency was trading at 39,000 Tuesday, according to traders in the Iranian capital. That compares with the official value of 12,260 rials per dollar set by the central bank, a rate to which most Iranians, except some importers of essential goods including medicines, meat and grains, don’t have access. Iran’s economy is suffering after the US and European Union tightened trade and financial sanctions in the past year. The restrictions, aimed at curbing Iran’s nuclear programme, have limited the country’s ability to sell oil, its biggest export, and other goods in return for currencies such as dollars and euros. The rial’s dive happened about a week after the opening of an exchange center by the government, aimed at stabilising the market. Central Bank Governor Mahmoud Bahmani, cited in the Donya-e-Eqtesad newspaper Tuesday, said the institution will “fully cover real demand” for foreign currencies. Importers of basic goods such as industrial and agricultural machinery can benefit from a discount from the market rate there. “Managing the currency market means that the government must be able to direct demand away from speculation and toward real demand,” parliamentary member Hadi Ghavami was cited as saying in a report by the state-run Fars news agency Tuesday. ‘Fluctuating’ Management “Supplying currency at a rate 2 per cent below street prices” isn’t an appropriate policy, Ghavami said. “The government was supposed to manage currency fluctuations, instead it’s its own management that is fluctuating.” With accelerating inflation eroding the value of the rial, Iranians have turned to dollars and gold to protect savings. Some ordinary Iranians have also started to trade foreign currencies in the hope of making some cash, according to a report by the state-run Mehr news agency Ahmad Karimi-Esfahani, head of the society of syndicates and bazaar, said the government “isn’t fit” to make decisions for the markets. “The government’s wrong decisions have fed the price bubble for foreign currencies,” Karimi-Esfahani said in a report published today by Mehr. “The government has incited ordinary Iranians to trade currencies and today we are seeing that as much as it injects currencies into the market, it still can’t meet demand.” Iran’s inflation rate rose to 23.5 per cent in the month that ended on August 20 from 22.9 per cent the previous month, according to the central bank. The real rate is 29 per cent, Parliament Speaker Ali Larijani said last month, according to Shargh newspaper. Gulfnews