Iran’s government has no intention of even trying to increase currency exchange rate

Posted on October 18, 2012

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Iran’s government has no intention of even trying to increase the rate of exchange in the future, professor at the University of Glasgow Reza Taghizadeh said.

“Iranian government has manufactured down fall of the local currencies, in order to deal with other areas of its economic failure, including the low growth of annual product,” Taghizadeh explained.

Recently IMF (International Monetary Fund) released a report, according to which, Iran will manage to bring its high inflation lower and return to growth next year despite Western sanctions over its nuclear programme.

According to IMF’s semi-annual World Economic Outlook, the forecast said Iran’s gross domestic product would shrink 0.9 percent this year after 2 percent growth in 2011.

Its prediction for this year was a downgrade from a forecast of 0.4 percent growth in its last report in April, but the IMF projected GDP would expand next year by 0.8 percent.

The IMF expects inflation to moderate to 21.8 percent in 2013 from 25.2 percent in 2012. It predicted unemployment would hit 14.1 percent this year and 15.6 percent next, up from 12.3 percent in 2011.

Reza Taghizadeh believes one shouldn’t rely too much on IMF’s statistics, which were mainly provided by the Iranian officials.

“Economic data and the statistics employed by IMF to assess Iran’s prospective economic performances are mainly provided by the Iranian officials and therefore cannot be relied on as impartial inputs,” he said.

Taghizadeh noted that IMF’s report is not surprising, as IMF has always been supportive of local currency depreciations in the Third World economies and Iran has not been an exception.

“Even though, and despite its optimism, IMF expects Iran’s inflation to remain above 20 percent next year,” the UK based expert said.

Iran experienced an unpredicted sudden fall of its national currency of Rial against the US Dollar in September.

The USD rate in Iran increased from 13,000 rials in the beginning of 2012 to 25,000 in mid September, but suddenly rose to 36,000 during a week on Iran’s open market in late September.

Such sudden jump at currency markets caused tensions, and many dealers and traders were arrested by the local police for causing chaos. The price later rebouded back, yet the rate still remains high for the U.S. dollar in Iran.

Taghizadeh recalled, that Iran’s Rial has been falling against the U.S. dollar constantly ever since the Islamic Revolution.

“In the course of the last 33 years, since the revolution, the value of Iran’s local currency has plunged from 70 Rials against one US Dollar to 36.000 Rials nowadays,” he said. “The future for Rial could only get worse if other dynamics of Iran’s political environment stay unchanged.”

Noting the fall of Iran’s oil export, and that the country is currently losing some $140 million a day, Taghizadeh said that the local currency has lost about 70 percent of its value in the last 11 months.

“This shows how badly the sanctions bite the economy of Iran, despite of what the government and media say,” he underscored.

The EU has imposed new sanctions on Iran a few days ago, this time in banking sector, industry and shipping – all to increase pressure over country’s disputed nuclear program, which Tehran says is peaceful.

More than 30 entities were added to the sanctions list. The EU journal said the restrictions apply to the National Iranian Oil Company and 25 subsidiaries, the National Iranian Gas Company, the National Iranian Oil Refining and Distribution Company, and the National Iranian Tanker Company.

Iran says its nuclear energy program is totally civilian and aimed at power generation adding it needs the 20-percent-enriched uranium it produces for production of fuel for a reactor that produces medicine for cancer and other patients.

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