The devaluation of Iran’s currency has dramatically accelerated in recent days with the rial hitting an all-time low of 260,000 against the U.S. dollar on Sunday, an almost 10,000 rial drop in one day.

With the country’s oil exports chocked off by U.S. sanctions, the government has lost its main source of foreign currency income since May 2019, which pays for a significant chunk of its annual budget. Non-oil exports have also suffered by Washington's banking sanctions.

The devaluation of the local currency will also accelerate inflation, which was already running at close to 40 percent annually in 2019. Prices have been rising fast and reports say some merchants refuse to sell imported goods, fearing loss of their capital as the rial becomes meaningless paper for many.

The dollar traded at 160,000 rials in March and now at 260,000 it has risen close to 70 percent in just four months.

The coronavirus pandemic has also hurt the country's economy, as it has failed to control the spread of the virus since February.

Iranian officials including the head of the central bank have been promising “targeted interventions” to stabilize the currency market, but with little foreign currency to spare intervention cannot be effective.

President Hassan Rouhani and the central bank have blamed the drop in the availability of foreign currencies in the market on exporters.

Rouhani has said 20 billion euros for goods exported have not been returned to the country in recent months and threatened exporters with legal action. However, critics say Iran’s non-oil exports have not even reached 20 billion euros.