The Iranian currency rial continued its downward spiral and today was traded at 13,600 rials per dollar, a record low. The Central Bank of Iran (CBI) intervened during the day to keep the value of the currency close to its official exchange rate, but failed in its attempt.
Last June, the CBI devaluated the rial by 11%, setting the official exchange rate at 11,710 rials per dollar. The move was an attempt to close the gap between the official and market rates. In less than six months, the rial’s market value has lost another 16%. In fact during the six years of Ahmadinejad’s presidency, the rial has lost 45% of its value against dollar.
12 comments:
I expect some commentators to argue that the lower rial is good for Iran’s non-oil exports. While it is generally true that lower rate increases exports, but in this case the rapid slide in value creates an uncertainty for the importers of the Iranian goods, not knowing where the currency would stand in couple of weeks, and probably waiting for it to slide further. The uncertainty factor in exchange rates for both imports and exports are very negative.
Related to above, the rial loosing its value against dollar also is negative for oil exports. Even though the price of oil is going up, but the cost of the government to convert its dollar revenues to rial is rising even faster. This situation, if not controlled, would create serious issues for the government and the CBI.
Having said these, I invite a discussion here on the reasons for the sliding value of rial, its effect on foreign trade and oil exports.
Is all part of great iranian plan!!!
When Iranian currency is utterly worthless, then the banking sanctions won't seem so bad and all the poor people won't feel so poor!
This is good news!
Mr Uskowi the reason why some commentators argue that the lower rial is good is because most of them are regime apologists and anything the regime does even if it's a major calamity is good in their view.Even if the regime sells the southern part of Iran away to the Arabs it's right and your wrong.Amazing isn't it?
Mr Uskowi the rial has long been worthless therefore this isn't a surprise when you have a bunch of third rate uneducated idiots whose self interest is only to line their deep pockets running our country.
Nader, i disagree with your comment completely:
"Related to above, the rial loosing its value against dollar also is negative for oil exports. Even though the price of oil is going up, but the cost of the government to convert its dollar revenues to rial is rising even faster. This situation, if not controlled, would create serious issues for the government and the CBI."
You do realise that a weaker Rial makes the cost of converting dollars to rial cheaper? I.e. now the government has much more money to spend in Iran from it's oil revenues.
This news is not great but it's not terrible, if you follow the central banks comments, they want to devalue the rial (maybe not as much as has occured).
Iran being an import substitute economy, having a weak rial is not a bad thing.
Thought having said that, stabilty is always appreciated.
Sadly, the only hope Iranians have to get rid of this regime, is total financial meltdown.
And financial meltdown it shall be !
It's interesting to see anti-Arab racisim craping into the simplest and the most unrelated issues. When will iranians realize that Arian supremacy is outdated and shunned by most of the civilized world. Lets move on into the 21st century, shall we.
Anon 4:18 PM ,
Thanks so much for your comments. Your criticism is correct, I had misspoken, my apologies. What I meant was the effect on local businesses, not the government. Although it includes government-owned enterprises. The volatile rising exchange rate will make the conversion of rial to dollar more costly, and most of these major local producers depend on imported raw materials and the cost of exchange can and has endangered their businesses. I am familiar with some, and witness their struggle.
Of course the government, having monopoly-type control over the hard currency from the oil revenues, likes to convert them to as much rial as possible to continue its spending spree and its appetite to hand in cash to people in the name of subsidy reforms!
The main issue, and we both can agree, is lack of relative stability in exchange market, and a related problem; the co-existence of different exchange rates. The instability does not even help the buyers of Iranian goods, who cannot plan for future and always expect the rate to go lower. The existence of multiple exchange rates also is problematic, creating distortions in economic decision making and allowing for corrupt practices, the like of which we have witnesses in the past.
Bad for the Iranian consumers, as they are forced to consume more domestic goods instead of expensive imported goods.
But very good for the Iranian export industry, as Iranian goods get cheaper outside Iran, the more the Iranian currency devalues.
To a lesser extent also good for Iranian produces producing for the domestic market, as their goods sell better, the lower the Iranian currency is.
We all know the subsidy reforms were needed and the handing out of cash is a good thing if done in a progressive manner.
Jabbar Fazeli MD
Friend don't misunderstand Iranians we don't hate Arabs.We dislike the Persian gulf Sheikhdoms like UAE Saudi Arabia and Qatar.The Egyptian and north African Arab countries are good hard working people and are welcome to Iran likewise Syrian and Lebanese as well.
This regime in Tehran is an anti Iranian entity and has given away Iran's position to countries like Qatar,Saudi,UAE,Turkey,Russia,and Russian federation states.The regime has also let China flood Iran with their goods hence destroying domestic production despite what regime apologists say.
So my friend Iranians don't trust and dislike Russians and Chinese more than they dislike Sheikhdoms in Persian gulf.
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