Currency crisis hits Iranians, strains economy
DUBAI: Desperate to afford her daughter’s overseas university fees, 58-year-old retired Iranian teacher Maryam Hosseini withdrew all her savings from the bank to buy US dollars. It was not enough. With three years of study still to do, her daughter is heading back home, her future now on hold. Hosseini’s tale of growing poverty is an increasingly familiar one among Iranians, who have long bought US dollars to support their children financially or squirrel away savings.
“My daughter has to bury her dream of studying
abroad and she has to come back. I cannot afford it anymore,” Hosseini said. The cause of Hosseini’s misery was a sharp drop in the Iranian rial to its weakest against the US dollar. The currency’s fall has not only made life more expensive, it may also test Iran’s ability to prop up an economy battered by crippling US sanctions and the new coronavirus.
The dollar was being offered for 215,000 rials on Monday, according to website Bonbast.com, against an official rate of 42,000. The currency plunge in recent weeks had forced the central bank to act, pumping hundreds of millions of dollars into the market to stabilise the rial. Central Bank Governor Abdolnasser Hemmatti described the interventions as “wise and targeted”.
The bank had ample foreign reserves, he said, without disclosing their amount.
But current account and fiscal deficits brought on by the economic crisis may require tapping
those reserves, weakening Iran’s ability to curb rampant inflation, economists have said. “They have limited foreign exchange reserves to inject in the market and will not be able to contain further depreciation in the presence of U.S. sanctions and isolation from the international community,” said Garbis Iradian, chief economist for MENA at the Institute of International Finance. Eroding reserves
The rial has lost about 70 percent of its value following the US withdrawal from Iran’s 2015 nuclear pact with six powers in 2018 and reimposition of sanctions. The government has sought to compensate by creating several foreign exchange rates aimed in particular at easing the financial burden of importers. But in the free market, the rial has continued its downward spiral, even after the latest central bank intervention.