Iran to Introduce Three-Tiered Exchange Rates

Iran will introduce a three-tiered exchange rate system for imports, the semi-official news agency ISNA reported today. Quoting the chairman of Majlis committee on economy, ISNA said the new system will make distinctions for imports of basic, intermediate and luxury goods. (ISNA, 21 July)

1. 12,260 rials/dollar for ‘basic goods’
2. 15,000 rials/dollar for ‘capital and intermediate goods’
3. Free market value (19,100 rials/dollar on Saturday) for ‘luxury good.”

The Iranian rial has lost more than 60 percent of its market value in the past year (from 11,710 rials per dollar in July 2011 to 19,100 now). The oil revenues, the country’s major source of hard currency, have also gone down due to embargos as well as difficulties to move oil funds through the global banking system. The three-tiered system is designed to slow the rate of depletion of the hard currency reserves.

During the eight-year war with Iraq and its aftermaths, Iran experienced with a multi-tiered exchange rate as well. The system was abandoned because it created distortion in import markets and serious corrupt behavior when different rates were leveraged to make quick profit.

Photo Credit: A currency exchange shop in Tehran. ISNA/Abdulvaheed Mirzazadeh