0732 GMT October 21, 2018
Iran unveiled a much-awaited package of policies that it expects to help strengthen its national currency – the rial – that has lost half its value since April due to fears about US sanctions set to be imposed Tuesday.
Central Bank Governor Abdolnasser Hemmati said the plan reflected Iran’s self-confidence in the face of the looming US sanctions.
“This shows our power. The same day you (Americans) impose sanctions we open our economy. We have no problems, so why should our people worry?,” Hemmati, who was appointed to the post last month, said in a live televised interview on Sunday night.
US President Donald Trump’s decision to pull out of the 2015 nuclear agreement to lift sanctions in return for Iran curbing its nuclear program caused a run on the rial as companies and savers bought hard currency to protect themselves from the looming economic sanctions.
The Central Bank of Iran (CBI) has blamed “enemies” for the fall of the currency, and the judiciary said 29 people had been arrested on charges that carry the death penalty. On Sunday the judiciary said it had arrested a further seven people, including the CBI’s former top foreign exchange official and five foreign exchange dealers.
A state body led by President Hassan Rouhani and including the heads of the Judiciary and Parliament on Sunday partially lifted a ban on the sale of foreign currency at floating rates, allowing exchange bureaux to sell at unofficial market rates for purposes such as overseas travel.
That reverses the decision in April to ban trading currency outside the rate of about 42,000 rials to the dollar.
The April decision – combined with fears over US sanctions – fueled a run on the currency that saw it lose more than half its value.
Ahead of the announcement of the new measures, the rial gained slightly on the unofficial market, trading at 98,500 to the dollar, compared with 103,000 on Saturday.
Hemmati said the CBI will allow a “managed float” of the rial’s exchange rate and try to avoid using up its reserves to support the currency.
“The central bank will try not to interfere in setting the price of hard currencies, which will be determined by supply and demand, however, the bank’s supervision will prevent unbridled (market swings) and the creation of a black market,” Hemmati said.
It will allow the reopening of high street currency exchange bureaus that were shut down in April, although they will face stricter monitoring.
Essential items will still be available at the official government exchange rate of around 42,000 rials to the dollar, while other importers will negotiate rates with exporters.
The unofficial rate for the rial fell to a record 119,000 last week, before rallying in response to the government's efforts to address the crisis.
To encourage Iranians to return their hard cash to the economy, the plan allows the central bank to set up dollar savings accounts for ordinary people.
Non-oil exporters will be allowed to sell hard currency to importers, and there will be no limit on bringing currency or gold into the country.
In July, Iran opened a secondary foreign-exchange market for importers of non-essential goods that are not eligible to receive the preferential rate from the central bank.
On Tuesday, Washington will reimpose sanctions on Iran’s purchases of US dollars, its trade in gold and precious metals, and its dealings with metals, coal and industrial-related software.
The United States has told third countries they must halt imports of Iranian oil from early November or face US financial measures.
Reuters and AFP contributed to this story.