Iran central bank under fire as rial hits new lows
Iran's central bank has for weeks failed to provide U.S. dollars to traders to import essential goods, driving down the value of the country's currency against the dollar, a senior Iranian lawmaker said on Monday.
September 10, 2012 5:52 by Reuters
Iran’s central bank has for weeks failed to provide U.S. dollars to traders to import essential goods, driving down the value of the country’s currency against the dollar, a senior Iranian lawmaker said on Monday.
The Iranian rial slid to a record low on Monday, reaching 25,650 rials per dollar, about half its value a year ago, according to currency tracking website Mesghal.
That represents a slump of about 17 percent since Thursday and comes as Iran faces increasing economic and political pressure over its disputed nuclear programme.
The rial trades at two rates in Iran: a “reference” rate of 12,260 to the dollar maintained by the central bank and available only for the import of essential items, and the far weaker rate determined by a street market made up of small money changers, in which most Iranians can obtain hard currency.
Iranian lawmaker Gholamreza Mesbahi-Moghaddam, head of parliament’s planning and budget committee, accused the central bank on Monday of not providing the cheaper dollars to import basic goods for three weeks, forcing Iranian traders to turn to the private market for dollars and thus driving the rial down further.
“Unfortunately the government has made the biggest mistake in history by not injecting dollars to answer the demand of the foreign exchange market,” Mesbahi-Moghaddam said, according to the Fars news agency. “From three weeks ago the central bank has stopped supplying dollars.”
He added: “The halt in the supply of dollars has caused a sharp increase in their price in the market.”
Mesbahi-Moghaddam did not indicate how he found out about the central bank’s supposed change in policy.
In an interview with Iran’s Mehr news agency last week, an unnamed Iranian importer said the government had not provided subsidised dollars for the import of essential items for more than two weeks, leaving the goods stuck in customs. Items eligible for purchase with cheaper dollars include meat, grains, oil and sugar.
Central bank governor Mahmoud Bahmani, quoted by the Iranian Students’ News Agency on Sunday, said the reference rate would remain available for use by importers of essential goods and that he had no plans to change it.
“The reference exchange rate for essential goods will not rise and without a doubt, it will remain at that same 12,260 rials per dollar,” he said.
Bahmani added that some importers were taking advantage of the reference rate to buy goods and then selling them on to the public at prices which could only be justified if they had used the street rate.
But Mesbahi-Moghaddam’s allegations raised doubts about whether Iran has enough hard currency stores to weather Western sanctions aimed at forcing the Islamic republic to give up its nuclear programme.
At the end of last year Iran had $106 billion of official foreign reserves, enough to cover an ample 13 months of imports of goods and services in normal times, according to the International Monetary Fund.
However, the reserves may have started falling as the sanctions have cut oil exports. Iran’s monthly sales of crude oil, its major source of hard currency, may have dropped by nearly half in the course of this year, analysts have estimated.
Drops in the rial threaten to push up domestic consumer prices for food and other goods, adding to inflation that is already at double-digit levels.
Hashemi, a money changer at the Al Dhahery exchange in Dubai, said his office had stopped seeing business from Iranian traders in the last few days, as they grew fearful that their profits would be lost to the ups and downs of the market.
“Most people who come here to conduct trade, it’s not worth it for them,” he said, declining to give his full name because he was not authorised to speak to media. “If they buy dollars now with one dollar at 25,000 rials, if it goes down in one or two days to 24,000 rials, they will have lost money.”