Tehran- The imminent return of US President-elect Donald Trump to the White House, and the escalation of tensions with Israel, have increased pressure on the Iranian currency, the rial, to lose another part of its value and record a new record low.
The European Union added more pressure on the Iranian rial, after announcing its intention to activate the “trigger” mechanism, following Tehran’s condemnation by the IAEA Board of Governors, last month, for “not cooperating sufficiently” in its nuclear program.
The Iranian currency has continued to fall at a faster rate since Tehran received news of the fall of the regime of its Syrian ally, Bashar al-Assad.
After the Iranian press used to publish daily reports about the decline in the value of the currency against the dollar, the Iranian government’s economic team announced its plan to limit the deterioration of the riyal and rein in hard currency prices in the markets.
Supply and demand
In a step aimed at bridging the gap between the government exchange rates and the parallel market, the Iranian Central Bank canceled the government’s hard currency pricing allocated for the import of some basic goods, starting last Saturday, so that the price of the green currency was determined according to the supply and demand mechanism between exporters and suppliers in the consensus market designated for trading hard currencies. .
Following this step, the consensus price of the dollar stabilized the next day at about 600,000 Iranian riyals, but it continued to rise on Monday and Tuesday in the NEMA market for commercial exchanges in hard currency, at 613,000 riyals and 617,000 riyals, respectively.
In the free parallel market, the price of one dollar jumped to 768 thousand riyals last Monday, then touched the threshold of 778 thousand riyals yesterday, Tuesday, after trading at about 733 thousand riyals, on the eve of the launch of the new mechanism.
Objectives and justifications
The Iranian Central Bank’s move came after a number of factories refrained from continuing their activities due to the accumulation of losses resulting from compulsory pricing, as they were forced to display their export revenues in the government market, sell their hard currency at prices lower than their real price, and in return purchase raw materials according to parallel market prices.
The Iranian Minister of Economy, Abdel Nasser Hemmati, believed that implementing this mechanism is an initial step towards eliminating compulsory pricing, especially in the hard currency market, adding that compulsory pricing will lead to financial corruption, rentier distributions, and exacerbate difficulties in the hard currency market.
In a tweet on the economic of the state.
A strong shield to protect the economy
A segment of Iranian specialists believe that the Central Bank aims, with its measures, to encourage factories to produce and export.
Economic writer Hamid Sayed Qorbani welcomed the new mechanism, and considered it to be in the interest of economic development by supporting exports. It is also in line with the restrictions that should be exercised on imports in order to achieve comprehensive self-sufficiency and presence in foreign markets.
In an article entitled “The Harmonious Currency: A First Step Towards National Development” published on the Eqtisad Online website, Sayed Ghorbani believed that the new mechanism will reduce the volume of unnecessary demand for imports, and contribute to eliminating false demand for hard currency and leading to lowering its prices in the markets. Transferring profits from the basket of suppliers to exporters and supporting national production.
Given the national fear of a decline in oil exports with Trump’s return to the White House by imposing more sanctions, which may lead to an increase in the price of the currency in the markets, the writer likens the new mechanism to a fortified shield that will protect the national economy from external shocks to the exchange rate.
Political developments
On the other hand, Iranian economist Albert Baghzian recalls the obsession of successive Iranian governments about unifying the exchange rate and bridging the gap between official prices and the free market, stressing that the consensus price mechanism will succeed if it is satisfactory to suppliers and exporters, and spares them the need to review the black market for the sake of supply and demand. However, he does not expect the new mechanism to succeed.
In an interview with Stareh Sobh newspaper, Baghzian considered the lifting of foreign sanctions a condition for the Iranian economy to get rid of the crises of high hard currency prices and the decline in the value of the national currency, explaining that the exchange rate in Iran is affected by political developments more than economic indicators and supply and demand in the markets.
He said: “Given the reality of sanctions and tension in Syria and Trump’s return to power in the United States, concern will remain dominating the hard currency market in Iran, because the provision of sufficient hard currency is considered a condition for talking about unifying the exchange rate in a way that encourages the strengthening of the national currency and the decline in the value of foreign currencies.” .
The Iranian academic stated that his country is suffering from a problem in providing hard currency as a result of the sanctions, so that the proceeds from the sale of oil return in the form of goods into the country, stressing that imposing sanctions on the economy is equivalent to cutting off a person’s limbs and paralyzing his life, as the major powers have continued to impose the embargo instead of Wars and military attacks.
The fall of the lion
On the other hand, a third group in Tehran sees a direct relationship between the fall of Bashar al-Assad’s regime in Syria and the acceleration of the decline of the Iranian currency and its recording a new record low level against the dollar, due to the regional political development having major repercussions on the Iranian economy.
Although the value of trade exchange between Iran and Syria did not exceed 170 million dollars during the past year, the fall of Assad paints a blurry horizon in the face of Tehran’s dues to Damascus, which are estimated at tens of billions of dollars.
In this context, the analytical website (Bazar News) published an article under the title “The Syrian Crisis and its Impact on the Iranian Economy,” in which its author believes that the new scene in the Levant will expose part of Iranian investments in Syrian infrastructure and its military and security sectors to destruction.
The article believes that the lack of security in Syria may affect Tehran’s investments in neighboring countries, as well as undermining the Iranian corridor linking East and West and diminishing its standing in front of the corridor scheduled to link India and Europe via the Middle East (IMEC).
