Iranian currency losing value as Tehran tries to rescue economy
The US economic sanctions are putting Iran's mullah in a tight spot. The sanctions have drained Iran's foreign currency reserves and made it difficult for Iran to conduct any financial transactions.
To mitigate the
crisis, Iran thinks of using crypto currencies as an alternative to foreign
currencies.
The Iranian economy
has deteriorated greatly as a result of the US sanctions. The inflation rate
has risen, leading to an unprecedented increase in commodity and service
prices. There is also a commodity shortage in the market.
The Iranian national
currency continues to lose value, amid expectations that the inflation rate
will rise to 50%, the highest since the 1979 Islamic Revolution.
Currency
cancellation
On August 21, the
Iranian government referred to parliament a decision to cancel out four digits
from the value of the currency.
The move amounts to a
state recognition of the deterioration in the value of the currency as a result
of the US sanctions, even as Tehran denied this several times.
The Iranian government
also referred a bill to parliament that restricts Iranian riyal transactions to
dealings between the country's banks.
The central bank only
has to remove digits from the value of the currency in order to cope up with
the rising inflation rate.
Removing
digits
This was not the first
time Iran cancels out digits from its currency. In 2017, the central bank had
to cancel out a digit. This time, the bank has to remove four digits. This
means that the value of each 1 million Iranian riyals will go down to 100
riyals only.
A US dollar now sells
for 120,000 Iranian riyals at the nation's banks, which accounts to a drop of
250% in the value of the riyal. Before the 1979 revolution, the dollar sold for
70 riyals only.
Claims
The Iranian Central
said in a statement late yesterday that removing the four digits from the
currency would save paper.
However, the four
digits removal would cause the currency to lose a lot of its value.
Iranian affairs
specialist Osama al-Hatimi said Iran works hard to rescue its economy which
deteriorated a lot because of the US sanctions.
The Iranian economy,
he said, suffers from a lot of problems because of administrative and financial
corruption.
"Iran is only
trying to get around the US sanctions by the new measures," al-Hatimi told
The Reference.
