Friday, October 7, 2022

Increasing Dollar Rates in Iran Provoke Criticism

The runaway dollar has sparked serious concerns in Iran over what many believe could eventually prove costly for a country which has been planning for months to reap the benefits of the removal of the sanctions.

The surge of the greenback into the channel of above Rials 40,000 drew criticism against the government of President Hassan Rouhani in the media as was clear from the front pages of the dailies on Tuesday.

Sharq newspaper – affiliated to the reformist camp – called on the government to release dollars into the market and help ease the rising rates.

It questioned why Rouhani’s financial team was failing to do so – what it said was already strengthening the scenario that the government was trying to reap the benefits of high dollars against the Rial.

“The government [of President Rouhani] is benefiting from the high rates of the dollar and is preventing the Central Bank of Iran (CBI) from interfering to control the market,” it wrote.

“If the government fails to take a measure to control the rate of the dollar, it will lose its greatest achievement [the stabilization of rate of the dollar] and that at a time that the country is preparing for the next year presidential election.”

At the end of trading on Monday, the Rial was quoted in the free market at 41,500 to the dollar, weakening from around 41,250 on Sunday and 35,570 in mid-September. Before this month, the record low was about 40,000, hit in late 2012, Reuters reported.

Aftab-e Yazd highlighted remarks by unnamed CBI officials as well as Mohammad-Baqer Nobakht, the government spokesman, as saying that the recent rises in the rates of the dollar were “temporarily” and that the rates would subside soon.

“At the same juncture each year when the world is preparing for the new year holidays, there is a surge in the rates of the dollar,” the daily quoted Nobakht as saying, highlighting his suggestion that the dollar was rising as a result of a “psychological factor”.

“This is a result of psychological issues. The rise of Rials 1,000 in the rate of the dollar is not acceptable to the government and the dollar will ease God willing.”

Pedram Soltani, one of the country’s top merchants, told Arman newspaper that the rising dollar could hurt Iran’s industrial production.

“The rapid rises in the rates of the dollar … will increase production costs,” said Soltani, who is also the first vice president of Iran Chamber, Industries and Mines.

It is for the same reason that it is incumbent on the CBI to gradually increase the rates of the dollar in tune with the inflation, he added. Any failure to do so would enable the dollar to gather force and release its energy to the market – what is today blamed for the recent surges in the rates of the dollar, he warned.

Meanwhile, Reuters in a report put the blame on the rising rates of the dollar on fears in Tehran over the potential risks to Iran’s economic plans once the US President-elect Donald Trump takes office.

Reuters has specifically highlighted Trump’s promises to undermine a landmark nuclear deal that Iran sealed with world powers last year – what eventually led to the removal of some economic sanctions against the country.

Ebtekar newspaper also echoed warnings that the high rates of the dollar could eventually undermine Rouhani’s popularity, stressing that this could eventually cost him dear particularly given that he is bracing for next year’s election.

When Rouhani took office, the dollar had increased by 298.5 percent during the tenure of his predecessor Mahmoud Ahmadinejad (2005-2013), it wrote.

Rouhani was able to stabilize the currency market despite severe impacts that had resulted from sanctions as well as the low oil prices.

“It was expected that the government would still continue the previous trend in face of difficulties now that it is in the last year of its tenure.”

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