The Iranian rial has plunged by one-third of its value – just in the first few months of this year – as government efforts fail to pull the currency off record lows. The unit has fallen to 60,000 to the dollar, a devaluation that can be traced all the way back to the 1979 Islamic Revolution, CNBC noted Friday, when 70 rial could be exchanged for one dollar.
Officials said this week that the exchange rate is now set at 42,000 rials to the dollar, and that any attempts to exchange money at a different rate would be met with harsh punishments. Police arrested a reported 90 currency traders last February, but the crackdown failed to curb informal foreign-exchange activity.
An analyst at political risk consulting firm Eurasia Group said the move this week would have some effect in the short term.
“The policy change, combined with new restrictions on foreign currency holdings, will likely succeed in arresting the rial’s collapse in the immediate term,” Henry Rome was quoted by CNBC as saying in a research note.
The deepening currency crisis, along with the broadly deteriorating economic situation which led to recent nation-wide protests, has apparently raised the temperature in Iran’s parliament:
Iran’s Parliament thrown into chaos as Central Bank chief addresses Iran’s currency crisis. Regime elite under immense pressure turn against each other.
— Alireza Nader (@AlirezaNader) April 10, 2018
And if things weren’t bad enough already, the current US administration looks poised to unilaterally abrogate the 2015 Iran nuclear deal, a move that would reinstitute sanctions and which analysts say would be a massive blow to Iran’s struggling economy.
“The return of secondary sanctions would most likely put extreme strain on Iran’s economy and cause demand for the dollar to spike,” Eurasia Group’s Rome said. “It is unlikely the central government could maintain a rate at 42,000 rials under those circumstances.”