Figures released by Central Bank Of Iran (CBI) show that during four days since July 18, it injected $921 million into the foreign exchange market to boost the country’s currency against the U.S. dollar.
Since March, Iran’s rial fell by nearly 70 percent and reached 260,000 against the dollar. Three years ago, before the United States pulled out of the 2015 nuclear deal and reimposed sanctions, Iran’s rial traded at 32,000 to the dollar.
The first CBI intervention came on July 18 and 19 to the tune of a $300-million dollar injection at a much lower rate than the free market for importers. On Monday, July 19 the bank injected $342 million and on Wednesday $279 million.
As a result of these interventions, the rial rose nearly 20 percent by Wednesday, standing at 217,000 to the dollar, but on Thursday it again slightly dropped to 220,000.
U.S. sanctions have almost completely dried up Iran’s oil export revenues and seriously hurt non-oil exports. The government has been withdrawing money from its foreign currency reserves, which according to the International Monetary Fund will decrease by $19 billion this year, declining to $85 billion. Next year the IMF forecasts another $16 billion decrease of reserves to $69 billion.
Iran’s imports will exceed its exports this year for the first time in contemporary history, draining foreign currency reserves by $19 billion.
Iran’s currency has been under constant pressure since the 1979 revolution and the Islamic Republic governments have always resorted to injected dollars into the exchange market. But in the past the country had oil money and able to intervene. Nevertheless, interventions have not worked and the national currency has fallen more than 3,000-fold in 41 years.
The head of the central bank announced recently that in the past 15 years $280 billion dollars was spent trying to maintain the value of the rial. However, almost all the money the government poured into the market left the country in a continuous process of capital flight.
It is not clear if the CBI will be able to maintain this week’s pace of support for the rial. If its interventions stop, the dollar is expected to rise again.