Iranian currency losing value as Tehran tries to rescue economy

Sherif Abdel Zaher

The US economic sanctions are putting Iran’s mullah in a tight spot. The sanctions have drained Iran’s foreign currency reserves and made it difficult for Iran to conduct any financial transactions.

To mitigate the crisis, Iran thinks of using crypto currencies as an alternative to foreign currencies.

The Iranian economy has deteriorated greatly as a result of the US sanctions. The inflation rate has risen, leading to an unprecedented increase in commodity and service prices. There is also a commodity shortage in the market.

The Iranian national currency continues to lose value, amid expectations that the inflation rate will rise to 50%, the highest since the 1979 Islamic Revolution.

Currency cancellation

On August 21, the Iranian government referred to parliament a decision to cancel out four digits from the value of the currency.

The move amounts to a state recognition of the deterioration in the value of the currency as a result of the US sanctions, even as Tehran denied this several times.

The Iranian government also referred a bill to parliament that restricts Iranian riyal transactions to dealings between the country’s banks.

The central bank only has to remove digits from the value of the currency in order to cope up with the rising inflation rate.

Removing digits

This was not the first time Iran cancels out digits from its currency. In 2017, the central bank had to cancel out a digit. This time, the bank has to remove four digits. This means that the value of each 1 million Iranian riyals will go down to 100 riyals only.

A US dollar now sells for 120,000 Iranian riyals at the nation’s banks, which accounts to a drop of 250% in the value of the riyal. Before the 1979 revolution, the dollar sold for 70 riyals only.

Claims

The Iranian Central said in a statement late yesterday that removing the four digits from the currency would save paper.

However, the four digits removal would cause the currency to lose a lot of its value.

Iranian affairs specialist Osama al-Hatimi said Iran works hard to rescue its economy which deteriorated a lot because of the US sanctions.

The Iranian economy, he said, suffers from a lot of problems because of administrative and financial corruption.

“Iran is only trying to get around the US sanctions by the new measures,” al-Hatimi told The Reference.