The Iranian currency rial fell to new lows against the U.S. dollar in trading on Sunday at Tehran’s exchange market, going above the 220,000 rial to the dollar mark.
The battered currency was trading above 210,000 a day earlier and the Sunday, July 5 drop was almost 8,000 rials. The euro traded at 247,950.
Iranian officials describe the recent steep fall of the rial as temporary and ascribe it to “psychological operations against Iran to trigger unreal concerns” among the people and traders.
However, the rial has fallen 3,000-fold since the establishment of the Islamic Republic in 1979, when the dollar was equal to just 70 rials.
An economy growing too slowly for decades coupled with international and U.S. sanctions in the past decade and misguided fiscal policies have hurt rial’s value, which has dropped 24-fold just in the last ten years.
Mehr news agency reported that the devaluation was discussed in Iran’s parliament on Sunday and lawmakers blamed the crisis on “wrong domestic policies”. The parliament with a clear hardliner majority holds President Hassan Rouahni’s administration responsible.
Since May 2019, strict U.S. sanctions on Iran’s oil exports have severely restricted its foreign currency income and the government has been forced to repeatedly withdraw funds from state reserves.
Although some observers believe that the government is benefiting from the devaluation of its currency since it is the main supplier of dollars and that the Central bank is manipulating the market, it is unlikely the devaluation of any currency would be helpful for any government. Devaluation leads to runaway inflation and can lead to political volatility in the country.