Iran is facing a new wave of financial challenges, against the backdrop of which the value of the national currency is plummeting. On 5 September, the exchange rate on the free market reached 228,000 tomans to the US dollar — equivalent to 2.28 million rials. This sharp decline has occurred against a backdrop of rising inflationary pressures and severe economic restrictions linked to US sanctions, as well as restrictions on Iranian oil exports, which are the country’s main source of foreign exchange earnings.
The day before, the Governor of the Central Bank of Iran, Abdolnaser Hemmati, had attempted to reassure the public that the country was not facing any serious problems with a shortage of foreign currency for imports. Hemmati attributed the situation on the foreign exchange market to the actions of speculators and precautionary demand, whilst also noting capital outflows. However, his statements failed to have the desired effect, and the dollar exchange rate continued to rise.
Having previously surpassed the 200,000 tomans mark by the end of August, the exchange rate continues to rise inexorably. Despite Hemat’s assurances that Iran has ‘sufficient’ foreign currency reserves and is prepared to inject up to $2 billion into the market if necessary, the exchange rate has not slowed its rise.
Iran’s economy has long been under pressure due to years of US sanctions and a naval blockade, which have severely restricted oil exports. This is leading to a deterioration in the financial situation and rising prices for essential goods. According to official figures, year-on-year inflation stood at 89 per cent in August, whilst prices for food and drink rose by 127 per cent compared with the previous year.
In response to the current economic instability, a group of Iranian lawmakers has written to the heads of the country’s three branches of government, expressing concern over the increased uncertainty in the currency, gold and coin markets, which has affected not only economic actors but the entire population.
Iran’s currency is the rial, although most Iranians are accustomed to thinking in tomans, where one toman is equal to ten rials. This complex economic situation poses a serious challenge for Iran’s leadership, which must find ways to stabilise the national economy.