Iran rial plunges to virus-induced lows

TEHRAN, Iran – The Iranian rial plunged to new depths against the United States dollar on Monday, June 22, in what economists said was a slump partly induced by the Middle East’s deadliest coronavirus outbreak.

At Tehran’s foreign exchange hub on Ferdowsi Street, the currency was being traded at around 192,800 to the dollar at midday, according to Agence France-Presse (AFP) journalists.

The rial has hit rock bottom in the past month, collapsing even below the 190,000 rate it fell to in the wake of the US decision in 2018 to withdraw from the Iran nuclear deal and reimpose sanctions.

Reza looked dispirited as he went from exchange to exchange hunting down better rates for dollars needed to pay for a family member’s overseas university fees.

The value of the rial against the dollar is “beyond awful now,” said the 35-year-old, who has a job in Tehran’s Grand Bazaar.

“We’re seeing a different rate every day,” he told AFP.

The street was busier around government-owned exchanges, as people formed long queues to take advantage of a central bank scheme offering discount rates.

One of those standing in line was a 30-year-old physiotherapist planning to emigrate to Australia.

“The more I work, the less dollars I can buy,” she said, only giving her name as Niki.

“This has affected my welfare, made me more stressed. It’s a bad situation,” she said as she eyed a digital board displaying the latest rates in red.

Iran’s already fragile and sanction-hit economy started deteriorating after it reported its first coronavirus cases on February 19, and it has since struggled to contain the outbreak.

US sanctions reimposed in 2018 mainly targeted Iran’s oil sales lifeline, prompting the Islamic republic to focus on its manufacturing sector with exports mostly aimed at its neighbors.

Coronavirus crisis

Iran earned just $8.9 billion from the sale of oil and related products in the year to March, down from a peak of $119 billion less than a decade ago, according to Mohammad Bagher Nobakht, the head of planning and budget organization.

Coupled with the lower revenues, the coronavirus pandemic led to a temporary shutdown of the economy, border closures, and a halt in non-oil shipments.

“The main cause of the current crisis is the coronavirus,” said economist Saeed Laylaz, who has acted as an adviser to Iranian presidents.

“Our non-oil exports have virtually stopped, particularly to neighboring countries” due to the COVID-19 outbreak, he noted in a phone interview.

Iran’s health ministry on Monday announced 119 new coronavirus deaths and another 2,573 cases of infection.

That takes the overall toll to over 9,742 dead out of more than 207,500 cases in the outbreak, with official figures showing an upward trajectory in new cases of infection since early May.

Iran’s government closed non-essential businesses in March in a bid to stem the spread of the virus, but it refrained from imposing a mandatory lockdown on the population.

Restrictions have been eased gradually since April with officials arguing the economy cannot remain shut down.

But the rial’s sharp decline was “not unpredictable,” said Laylaz, given the considerable growth of liquidity which leads to rising inflation.

The economist said the forex market turmoil had led to “increasing social and political pressure on the government.”

According to Yaser Shariat, a market analyst heading a stock brokerage, the rial’s troubles may “continue until the epidemic is brought under control” and borders are reopened.

Most of Iran’s border crossings with its neighbors remain closed, save for few in Iraq’s Kurdistan region, according to Iranian authorities. – Rappler.com