Gov’t under Pressure to Do More to Stop Rial’s Historic Plunge

A dramatic decline in the value of the Iranian rial has increased the prices of imported consumer goods and depressed some markets in the past few months.

On Monday, one US dollar was traded for IRR 120,000 in the free market, leading the government to face a strong backlash from political and social circles for its handling of the economy.

Lawmakers, experts and figures from various political persuasions, particularly the conservative critics of the government, have pressed Rouhani to reshuffle his economic team to halt a plunge in people’s purchasing power and tamp down public discontent.

Ordinary citizens have also taken Rouhani’s administration to task on social media, highlighting the hardships they face in making ends meet amid high inflation.

Amid sharp criticism, Rouhani’s cabinet last Wednesday approved Abdolnasser Hemmati to replace Valiollah Seif as the new governor of the central bank.

Seif’s replacement, a former professor of economics, banker and insurance official, had been appointed as Iran’s ambassador to China before he was called back from Beijing for the new job.

The first senior shake-up since the beginning of forex rate problems suggested the embattled Rouhani is eventually conceding a need for change to ease criticism.

But many critics believe a long way is ahead for the government to restore public trust and it needs to get more serious about the country’s economy.

Some lawmakers, including Jalal Mirzaei, have threatened the parliament could move to impeach the government’s economic ministers if the president fails to take action.

 

Popular Expectations

Lawmaker Aziz Akbarian said on Sunday people expect more dismissals because of the tough economic reality facing the nation of 80 million.

“The negligence of the government’s economic team has led to raging inflation and grave economic hardships. There is no commodity whose price has not increased by 50 percent,” IRNA quoted him as saying.

The lawmaker referred to the government’s plan to unify official and free-market exchange rates, which was announced last month, and said it has failed to improve conditions and has just produced more corruption.

“Currency reserves are not allocated to basic goods … they are spent on unnecessary imports,” he said.

“I urge the government to move to reshuffle the economic team … Replacing Mr Seif is not enough. The government’s economic team is weak and ineffective,” he said, speaking in an open parliament session on Sunday.

Zabih Nikfar, another lawmaker, urged Rouhani to accelerate a shakeup in the Cabinet, as his economic team is really in need of fresh blood.

“Taking into account the conditions of the currency and [gold] coin markets, people expect the government to keep up reforming the economic team,” ISNA quoted him as saying in the parliament on Monday.

 

Seif’s Replacement a Show

Some other figures critical of the government’s performance have called Seif’s replacement a show, blaming at least part of the current crisis on the economic policies of the government.

These figures, who are mainly conservative, believe the exchange rate problems have their roots in the neoliberal thinking of key policy makers, which has increased liquidity, spread corruption, weakened domestic production, intensified the class conflict and brought rampant inflation.

Majid Mottaqifar, the spokesman for the conservative Resistance Front, told Fars News Agency on Monday that the dismissed official, Valiollah Seif, has been a victim of economic policies devised by others.

“Replacing Mr Seif wouldn’t do any good, as he was not the real governor of the economy,” he said.

“The central bank has no independence in policy-making and the government sees the body as a penny bank … Although Seif’s performance was mediocre, he was a victim of real economic policymakers,” he said.

Mottaqifar said the party believes the government has a naive view about Iran’s economy and it is mismanaging Iran’s monetary policy.

“According to this view, the country is kept waiting for foreign openings. Our urgent need is a change in this view,” he said.

“The real problem lies in people who keep the country waiting for a deal with the west,” he said.

Rouhani vowed during the presidential campaign for the 2013 elections that a nuclear agreement to settle Iran’s long-running dispute with the west – which was eventually reached in 2015-  would bring prosperity after prolonged isolation.

Conservatives believe this forecast has proven to be a miscalculation and Rouhani’s government has made a big mistake by pinning hopes on other countries to help Iran revitalize its economy.

 

Currency Coup or Economic War?

This is while some figures believe Rouhani is not to blame for the current economic hardships.

Some officials and experts have described the exchange rate problems as part of an economic war launched by the US, which has hardened its line against Tehran and is openly talking about the need for a regime change in Iran.

US pulled out of the 2015 nuclear deal early March, threatening to impose the “highest level” of economic bans on the Islamic Republic that would ultimately destroy its economy.

But speculations over the root cause of the current conditions are not limited to the government’s mismanagement and the adversaries’ economic war.

The pro-reform Arman-e Emrooz Daily has even raised the possibility that the crisis could be a “currency coup”, suggesting in an article published on Monday that the government’s political opponents could be behind the wild exchange rate fluctuations. The report says the government’s opponents seek to damage Rouhani’s reputation and kill the reformists’ chance to win the next presidential elections in 2021.

The reformist news website Entekhab also said in a Monday report that domestic elements and opponents of the Rouhani administration, rather than foreign factors and enemies, are behind the current crisis in the country’s economy.

“Economic experts unanimously believe no foreign pressure, sanction, or generally economic factor can lead to such a plunge in the value of Iran’s national currency,” the report said.

It also blasted a recent report published by the conservative newspaper Resalat which predicted the US dollar rate will even increase to IRR 250,000, and said the opponents of Rouhani are destroying the entire country in order to achieve their partisan goals.