Governmental Stabilization of Exchange Rate Until February 11
How Raisi Burned the Nation’s Assets
According to Iran Gate, it’s been about a month and a half since Mohammad Reza Farzin was appointed as the governor of the Central Bank. During this time, events have occurred that have led to serious criticisms of his performance.
Among these criticisms is the unprincipled and unprofessional performance of the Central Bank in the currency market. The exchange rate of the rial to the dollar in 2022 has increased by more than 75%, while the government started the year with a dollar at 26,000 tomans. However, currently, the dollar has broken the psychological ceiling of 46,000 tomans, which experts see as a strong signal for the dollar to jump to the 50,000-toman channel.
In the complex and unusual economic system of Iran, setting the exchange rate is the responsibility of the country’s Central Bank. The US dollar rate in the free market, which has become an important gauge for assessing the country’s economic situation and the value of the national currency, has recently drawn more public attention. Last night, Mohammad Reza Farzin appeared on the Islamic Republic’s broadcasting service to provide explanations regarding this attention and the new record in the currency market, which only added to economists’ ambiguities and concerns.
Asset Burning in Honor of the Revolution’s Anniversary
The remarks of Mohammad Reza Farzin two nights ago on television indicated widespread asset burning by the government and the Central Bank in the past 40 days. According to the Central Bank governor’s statements, the exchange rate has been stabilized at 45,000 tomans in the last month through heavy currency injection, although Farzin, deflecting, considers even this price to be fabricated and the result of manipulation by a mysterious and imaginary force. However, experience has repeatedly shown that the market mechanism will punish governments and those who swim against the current.
In this case too, Farzin, like his predecessor who did not recognize the free market rate, attempted to evade forward. In this television interview, he considered the US dollar rate to be 42,000 tomans and labeled other prices as fabricated and the result of enemy interference. But what is the reason for these statements by the Central Bank governor?
Evidence suggests that the Central Bank is trying to prevent the dollar rate from jumping beyond the 45,000-toman range in the free market until February 11, the anniversary of the revolution’s victory. In his recent television interview, Farzin, by referring to the amount of currency allocated in the NIMA market, confirmed suspicions surrounding the stabilization of the exchange rate through extensive currency injection.
Currency Injection with the Aim of Deliberate Cheap Sale of Dollars
At first glance, it may seem that if the government tries to reduce the dollar rate by injecting currency cheaper than the real market price, it is doing something positive. However, economists disagree with this idea and consider such actions by the government and the Central Bank to be destructive and harmful. Experts and specialists in the field of economics believe that if the government takes such an action and offers currency below the real market rate, it is stepping in the direction of burning people’s assets, who ironically think they are winning the exchange rate stabilization game.
In any case, this approach has existed with varying intensity in different governments, but evidence shows that the Raisi government, in the past 40 days and using an apparently legitimate lever, has set an unprecedented and terrifying record in currency injection and burning people’s assets.
According to the Central Bank governor’s statements, this institution has increased the supply of dollars by more than 50% above the daily market demand in the past 40 days. Farzin announced in a special news interview on the Islamic Republic’s broadcasting service that over 6.5 billion dollars have been allocated in the NIMA market.
It should be noted that the daily market demand is approximately 120 million dollars on average. According to the statistics provided by Farzin, it can be concluded that the Central Bank has injected more than 180 million dollars daily into the market. As we know, this supply has been done at a price significantly lower than the real exchange rate in the free market. Experts believe that this action by the Central Bank and the government is aimed at preventing the dollar from reaching 50,000 tomans until the forty-fourth anniversary of the Islamic Revolution’s victory.
Confirmation of Asset Burning in the Currency Market
Currency market analysts believe that the jump in the dollar price right on February 12, 2023, is a confirmation of the claim that the government deliberately burned national assets just to maintain appearances during the Fajr decade of 2023. This more than 1,500-toman jump in the dollar rate in just one day caused the Central Bank governor to suddenly and unexpectedly appear on the Islamic Republic’s television and try to justify the more than 75% decrease in the rial’s value over the past eleven months.
Perhaps the best description of the current state of Iran’s economy was written by Pedram Soltani, an economic activist and vice president of the Iranian Chamber of Commerce, in a tweet with this content: ‘The sound of the bridge collapsing under the train of Raisi’s progress can be heard, but the locomotive driver sounds the horn so it won’t be heard.’