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Iran's Economic Crisis Worsens As Central Bank Is 'Closely Watching'

TEHRAN, Jul. 25 (MNA) – Abdolnaser Hemmati has been appointed by Rouhani’s cabinet as the new governor of Central Bank of Iran, replacing Valiollah Seif.
TEHRAN, Jul. 25 (MNA) – Abdolnaser Hemmati has been appointed by Rouhani’s cabinet as the new governor of Central Bank of Iran, replacing Valiollah Seif.

The Central Bank of Iran has attributed unprecedented hype surrounding the country's forex and gold markets "mainly to enemies," adding that the increase in gold prices and rate of exchange of foreign currencies has nothing to do with Iran's "economic realities."

A statement released by the bank on July 29 said, "Recent developments in the gold and forex markets are part of the conspiracies hatched by the country's enemies in order to agitate the economy and rob the people of their psychological security," adding that the bank is "closely watching the developments."

In the meantime, the Iranian judiciary has announced the arrest of 29 individuals on charges of disrupting markets, adding that more arrests are under way.

On July 29, the rate of exchange for the U.S. dollar crossed the 100,000 rial milestone and even neared 110,000 rials in the afternoon, while the price of standard gold coins reached over 40 million rials, the Iranian media reported.

But the hype did not stop there, as Iranian media reported the rate of exchange for US dollar reached 120,000 rials for each dollar Monday morning July 30

Rial Problems July 30 2018
Rial Problems July 30 2018

The hype on the market took place as the central bank's new governor, Abdolnasser Hemmati, took over. He had promised to implement President Hassan Rouhani's plan to improve the situation of Iran's ailing economy.

Rouhani had called on Hemmati upon his appointment to "revitalize the banking system." Hemmati's mandate as Central Bank governor also includes "reforming the banking system and financial and monetary policies, and the improvement of banking relationships with the world as well as preserving foreign exchange reserves as the priorities of the new head of the central bank."

In a new statement released on July 29, Hemmati said he was planning the bank's new approach based on Rouhani's suggestions. He said the new plan would be implemented within a few days.

Iranian officials had talked about their plans to confront the rising price of gold and foreign currency. This is also not the first time they have attributed the banking system's failure to the conspiracies of so-called enemies.

The new governor also said on July 29 that "enemies are planning to eliminate the administration's social capital and suggest the government's weakness."

On the same day, announcing 29 arrests, judicial spokesman Gholamhossein Mohseni Ejei said that "more arrest warrants have been issued and the charges of some of the suspects are tantamount to corruption on Earth," a charge that would entail the death sentence in Iran's Islamic judicial system.

The arrests on the market are nothin new. Only one day before the landmark hike in prices, 18 others were arrested on charges of disrupting the markets.

Economic analysts have said violent measures such as arrests might calm the markets in the short run, but this kind of security measure is not effective in the long run. The analysts maintain that such measures have proved to be futile on various occasions in Iran under President Mahmud Ahmadinejad and his successor, Rouhani.

Other analysts blame the Rouhani administration for the current economic crisis, adding that the government's policy to inject cash into the markets from the banks channeled money into the forex market, causing the everyday fluctuations that have overwhelmed the market in recent months.

Still other analysts say that the tensions between Tehran and Washington are the underlying reason for the Iranian markets' instability. The tensions and their impact on the economy have intensified following the U.S. pull-out from the nuclear deal with Iran and the war of words between Iranian and U.S. officials.

During the past four months, the rial has lost nearly half of its value against the U.S. dollar and other foreign currencies. One euro is currently being traded on Iranian markets for over 140,000 rials.

The upheaval on the markets has led to protest demonstrations all over Iran, with demonstrators protesting economic hardships and chanting slogans against senior government officials and Iran's military presence in the region.