Rapid Decline of Iranian Rial:
Since the onset of the Israel-Hamas conflict, the Iranian rial has experienced a significant decline, dropping approximately 13% against the US dollar since early January. As of mid-February, the exchange rate stood at about 570,000 rials per US dollar.
Official Disregard for Free Market Rates:
Despite the glaring devaluation, Iran’s Minister of Economic Affairs and Finance stated that the government does not officially recognize the free market exchange rate. Instead, it only acknowledges the lower government rate set by the Iran Center for Exchange as the official rate.
Government’s Strategy:
Iran asserts that its strategies to stabilize the rial in the international currency market are effective, despite evidence suggesting otherwise. However, scarcity of foreign currency at the lower government rate has forced many Iranians to resort to the black market for US dollars, leading to government crackdowns on unauthorized transactions.
Escalating Tensions and Economic Impact:
Tensions between the US and Iran have heightened due to incidents like the Houthi rebel group’s attacks on commercial ships in the Red Sea, potentially contributing to further devaluation of the rial. Speculations of a direct US-Iran conflict have added to the atmosphere of unrest and turmoil in Iran.
Government’s Response:
Iranian officials attribute the currency devaluation primarily to illegal currency brokers, maintaining that the government’s measures are effective in stabilizing the rial. However, the situation remains volatile amid escalating tensions and economic uncertainties.
SOURCE: Ref Image from Reuters
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