NCRI – While the US Dollar has reached more than 4000 tomans, the head of Iranian regime’s Central Bank has said that the current currency appreciation is temporary.
Regarding the recent rise in the value of foreign currencies, the Iran Resistance TV ‘Simay-e Azadi’ has interviewed Mr. Yazdan Haj Hamzeh with parts of it listed below:
Mr. Yazdan Haj Hamzeh: the value of foreign currencies especially US Dollar has become extremely unstable with sharp fluctuations so that in the past few days following Trump’s win in the US Presidential Election, the value of US Dollar has risen to close to 4000 tomans.
This instability occurs at a time when the Central Bank and Rouhani’s government had earlier announced that in order to attract foreign investment, they would need to stabilize the currency rates by determining a single rate by the end of the year, so that foreign currencies be available only at market rate, thus stopping the state-sales of currencies.
This move is highly necessary with regard to attracting foreign investment as the investors need to know at which rate their currencies are exchanged to Iranian Rial, and similarly at which rate their Rials will be changed back into the foreign currency once they want to take it out.
Responding to the question of why Rouhani’s government has failed to make a decision on offering a single currency exchange rate, Mr. Haj Hamzeh explained that “the instability in making decisions on a single currency rate is due to two main factors ; The first is related to the issue of supply and demand, which is subjected to censorships with most of which being out of the government’s control, which is quite contrary to what the head of the Central Bank has announced that such issues, namely the instability in currency market, are short-term and temporary. For instance, on the demand side, there’s an excessive amount of imports as the production has slumped due to not being cost-effective, and this amount is even rising along with an increase in population, demanding more money and more foreign currency.
On the other hand, another factor fueling the instability of currency rate is the amount of liquidity which is too much more than what the economy really needs. The liquidity has almost doubled during Rouhani’s government, reaching more than 1220 billion tomans which is close to Iran’s national gross product. A large part of the liquidity is in traders’ hands which are reluctant to work in the currency market as they’d rather make money out of their investments than keeping their money stagnant. So they prefer to buy and hold foreign currencies and sell it later at a higher price so as to make a profit.
Well, that was the demand side of the story. But as for the supply side, following the US Presidential Election, the international banks are more reluctant to transfer Iranian oil money. As stated by Majid Ansari, regime’s Vice President for legal affairs, “receiving cash is (still) an important issue.” Also the regime’s chairman of the joint chiefs of staff has said that “the government has not yet dedicated the armed forces’ budget, saying that they have problems receiving cash from foreign banks.”
So, more than ever there is the banks’ reluctance to transfer Iran’s money as well as provide Iran with cash.
Another issue which is somewhat new is the extension of Iran Sanctions Act, also known as the D’amato Law, which if approved and implemented, will cripple foreign investment in Iran’s oil industry which in turn will cut Iran’s currency revenues, thus crippling currency supply on the market.
So we see that these two factors, namely currency supply and sale, have also extremely darkened the outlook.