All tagged currency

Iran’s Currency Begins to Shrug Off Trump’s ‘Battle Rial’

◢ Over the last 18 months, the Iranian rial has lost nearly 70 percent of its value, hammered by the Trump administration’s decision to reimpose secondary sanctions on Iran in violation of the JCPOA. But new interventions by the Central Bank of Iran appear to have helped stabilize the currency, leading some commentators to proclaim that the rial is no longer vulnerable to Trump’s maximum pressure campaign.

Iran's Currency Crisis Is Decades in the Making

◢ The experience of countries such as China show that currency devaluation can be managed and even turned beneficial for the economy by enabling the growth of exports. But in Iran, the devaluation of the rial has never been proactively managed, and subsequent administrations have only sought to respond to repeated currency crises, about once each decade. As Iran faces another such episode, it remains to be seen whether a real monetary policy might finally emerge.

Iran's Currency Crisis is a Supply-Side Story

◢ On Monday, the Iranian rial sank to a historic low. But those Iranians who scrambled to convert their rials into dollars found it difficult to do so—as they have for months. This important detail of the current crisis has gone largely unexamined. While the determinants for demand for foreign exchange are well understood, the second determinant of market prices—foreign exchange supply—remains subject to mere passing mention. This is a mistake. Iran’s currency crisis is a supply-side story.

Iran's Government Steps in to Address Paper Crisis, But Papers Over the Cracks

◢ Iran is battling a paper crisis. Gradual price hikes have been increasing pressure on book and newspaper publishers over the last year, but the scale of the crisis became clear when Culture Minister Abbas Salehi announced on August 4 that the country has just enough newsprint paper in storage to meet two months worth of demand. The government has rolled out a support package that includes importing paper as an essential good. But the move defers real reform that is needed to address a decades-long problem of corruption and inefficiency.

Rising Prices Push Homebuyers Out of Iran's Capital

◢ A 41 percent rise in Tehran City’s average home prices has left some residents, especially renters, with no option but to leave the capital for more affordable housing units in suburban areas close to Tehran. As per the latest national census, Karaj was the top destination for residents moving out of Tehran during the five years to December 2017. In just the last three months, more than 53,000 individuals have moved from Tehran to Karaj City. In the first quarter of the Iranian fiscal year, the Karaj housing market recorded 65 percent growth in home sales and an 18 percent increase in the average price of residential units.

Closure of Tehran Bazaar Reflects Fierce Elite Competition, Not Popular Politics

◢ The bazaar of today is not the bazaar of forty years ago, and no longer plays the same role as a key actor in Iran’s popular political mobilizations. The recent bazaar closures reflect primarily the economic self-interest of bazaar elite, who sense an opportunity to put the brakes on reforms that threaten their unique capacities for lucrative arbitrage. Protests are being co-opted as a political tool at the expense of genuine civil society mobilization.

Iran’s Currency Crisis Spurs Action in Financial Reform Efforts

◢ Forced to respond by Iran’s recent currency crisis, the Central Bank of Iran is approaching regulatory reform in the financial sector with new energy. A critical deadline to meet standards set by the Financial Action Task Force is forthcoming in June. Iran needs to demonstrate progress in tackling financial crime estimated to include at least USD 27 billion in transactions annually.

Rouhani Government Unifies Iran’s Exchange Rates in Decisive Move to Stabilize Currency

◢  In a decisive move intended to stop the further devaluation of the rial, the Rouhani government announced it would unify the official and free market dollar exchange rates, settling on an official rate of IRR 42,000. First Vice President Eshagh Jahangiri made the announcement last night, declaring that trading dollars above the new rate would be a serious crime.