Iran ends rial support ahead of US sanctions
DUBAI — Iran’s central bank, acting on the eve of US sanctions, scrapped most currency controls introduced this year in a bid to halt a plunge in the rial that has stirred protests against the government of President Hassan Rouhani.
Under the measures, the central bank will allow the market to determine the rate of foreign-exchange transactions except the imports of essential goods and drugs, Governor Abdolnaser Hemmati told state television on Sunday night. Licensed currency houses whose trading had been halted will be allowed to resume operations from Tuesday, he said.
The rial’s slump to record lows has been at the heart of an escalating crisis facing Iran’s economy as the US seeks to isolate the Islamic Republic after pulling out of the 2015 nuclear deal.
“With activity being banned on the free market, people couldn’t access their foreign-currency needs and alternative prices had taken shape which led to corruption,” Hemmati said, according to the state-run Iranian Students News Agency.
“Given that we have suitable currency reserves we decided to allow the market to carry out its activity and let supply and demand form.”
A central bank official said exchange houses will determine the rial’s rate without any guidance from the regulator. Customers, however, will have to show a compelling reason to buy dollars, such as travel, medical or education expenses, and won’t be able to get large amounts, according to the official, who asked not to be named because he’s not authorised to speak to the media.
Earlier this year, the central bank said it would unify the exchange rate at 42,000 rials to the dollar in an attempt to root out unregulated trading.