Exchange Rates in Iran: Past, Present and Future

ECONOMY 28.11.2018
Murat Aslan Coordinator of Economy

Iran’s economy has witnessed multi-tier and unstable exchange rate systems which echo different ideological priorities, necessities of profitability in semi-market conditions and rentseeking contributions.

The rise in unemployment, fall in the standard of living and many other chronic socio-economic problems led to the current situation of the increasing level of social and political tension that have manifested itself in several protests during the last seven months in Iran. The protests which took place in June 2018 among the bazaar merchants in Tehran stemmed from the corruption scheme that was partially connected to structural problems in the Iranian economy. Although since the beginning of 2018, the Hassan Rouhani government has taken serious measures to ease the stress in both the financial and currency markets, the rial, Iran’s national currency, has displayed a downward and volatile pattern against other currencies. Moreover, during this period, the rial collapsed into a total free fall and lost more than 100 percent of its value against the USD. The rial’s significant depreciation against other currencies during the last few months was not only caused by the deterioration in some of the fundamental economic indicators or domestic political problems but also had a lot to do with the uncertainties originating from the US’s withdrawal from the nuclear deal or the Joint Comprehensive Plan of Action (JCPOA). Enormous negative sentiments about risk perception in both the financial and foreign exchange (FX) markets have emerged as a result of the reimplementation of the US secondary sanctions on Iran.

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