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Iran's Currency At New Lows Amid Pandemic And Government Borrowing

Ban notes at an Iranian currency exchange outfit. FILE photo

Iran’s currency the rial has again fallen to record lows against the U.S. dollar on Thursday, June 18, with each dollar trading at 188,200 rials or 20 percent higher than just a few weeks ago.

Until Sunday the dollar was below 180,000 rials but it rose throughout the trading week in Iran in the open market among citizens and money changers.

Two years of U.S. economic sanctions and four months of COVID pandemic have put tremendous strain on Iran’s economy and government finances. Iran has been forced to spend its national reserves and print money.

Radio Farda reported June 15 that the country’s money supply grew by 31 percent from March 2019 to March 2020, fueling inflation and eroding the value of the rial.

Government debt to local banks has also risen by 20 percent, reaching 4,000 trillion rials or more than twice compared with five years ago. When the central bank prints money it goes to government-controlled banks, where the government borrows from.

A week ago, the governor of the central bank claimed there was stability in the currency market, insisting that the bank had been able to prevent a further devaluation of the currency.

In early June, the central bank banned having or carrying more than 10,000 euros wroth of foreign currency for citizens.