Ali Mohammadi/Bloomberg - Faced with a plummeting currency — the rial — and toughened sanctions, Iran is warning that major speculators could face execution.
To prop up the rial, the Central Bank of Iran has taken seemingly tough measures.
The bank’s main goals have been to weed out those it blames for the crisis, described as “speculators acting in line with the nation’s enemies,” and to herd investors large and small back to the national currency.
To promote saving, the bank has raised interest rates from 12 percent to 20 percent. On orders of President Mahmoud Ahmadinejad, the rate of interest — officially “unclean” in Islam but never abolished here — had been set for years well below Iran’s official inflation rate of 20 percent, as part of a plan to promote investments in Iran’s production sector.
But the central bank’s main measure last week was announcing a new, extremely low exchange rate for the dollar and promising that the currency would become readily available on the market.
While the rate was set more than 50 percent lower than the street rate, no dollars were delivered to banks. Official money changers, who were forced to advertise the new rate but now are not selling, said they would sustain losses.
“Just announcing a new currency rate is not enough,” Mohammad Nahavandian, president of the Iran Chamber of Commerce, told the semiofficial Fars News Agency on Wednesday. “Steps must be taken in order to solve the situation.”
In an attempt to quell the worries of angry businessmen, Tehran’s Chamber of Commerce on Tuesday organized a seminar to discuss the hike in the prices of foreign currency and gold. Central bank representatives were invited to give explanations but did not attend.
Stressing that a solution to the currency crisis is needed urgently, the Tehran chamber’s chairman, Yahya Ale-Eshagh, warned that “people are ready to fight and die for their vital interests.” He did not elaborate on who they are ready to fight.
Restoring order to the currency markets is especially important for Iran’s private sector, which makes its money in rials. The sector accounts for about 20 percent of the country’s economy and has been hit hard by Western sanctions. By contrast, the government, which receives oil revenue mostly in dollars and euros, is profiting from the rial’s decline, analysts said.
“Their income is in dollars, so a strong dollar helps them to buy more rials to pay their bills,” said one prominent economist, who asked not to be identified, for fear of reprisals.
Politicians have charged that Ahmadinejad is incapable of handling the crisis.
In an open letter published Sunday, Ahmad Tavakoli, a leading parliamentarian, asked, “Why is the government stalling its decisions?” He also wondered why Ahmadinejad took a long trip to Latin America last month and decided to participate in a ceremony for religious theaters. “The government’s procrastination is an important reason for the problems,” Tavakoli wrote.
The government denies that it has no answers to the currency crisis, or that it is profiting from the rial’s plunge. “We have plans,” a government spokesman told parliament last week. “But we are keeping them secret to prevent the enemy from misusing them.”
Special correspondent Ramtin Rastin contributed to this report.
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