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Iran: Officials admit the regime manipulates currency exchange rates

Iran’s regime is deliberately manipulating currency exchange rates
Iran’s regime is deliberately manipulating currency exchange rates

Analyzing by PMOI/MEK

Iran, March 6, 2021—“Rising dollar prices and artificially keeping the dollar’s price high is an accepted reality in Iran. Therefore, we must accept the bitter fact that domestic policies have been the main culprit of rising prices, economic challenges, and the shrinking of the people's tablecloths," the state-run Jahan-e Sanat daily wrote on Feb 27.

For Iran’s strictly controlled media, this is a rare confession to the regime’s years of hiding the fact that it has deliberately increased the currency exchange rate to compensate for the budget deficit, the astronomical salaries of its officials and agents, and other expenses that result from tampering with the government’s financial records.

The government admits to manipulating the currency exchange rate

Iran’s currency, the rial, has two exchange rates. The official, government-declared exchange rate, which you’ll see if you Google “U.S. dollar to Iranian rial,” hovers at around 42,000 rials per U.S. dollar. However, the real rate being used in monetary exchanges in Iran’s markets currently stands at around 250,000 rials per U.S. dollar, about six times the government exchange rate.

Previously, various government officials claimed that the government has no influence on the market price of the currency. But, on February 27, Mahmoud Vaezi, Head of the President’s Office, finally made a rare admission to the government’s involvement in the wild fluctuations of the price of the rial. "We did this so that we could run the country's economy," Vaezi said, according to a report by the Asr-e Eghtesad website on February 27.

“Economically, the exchange rate in Iran is not 250,000 or 270,000 rials. We did this so that we could run the country's economy, so that today the enemies would say that the maximum pressure policy has failed and they are looking for a solution, and today Iran is in a position of power," Vaezi added.

But how does the regime run the country through the manipulation of currency prices? It’s simple. Government institutions, and individuals and companies that are run by the regime have access to U.S. dollars at official exchange rates. They use this currency to make purchases and import goods, which they then sell to the people at the market rate of the U.S. dollar, making huge profits. Therefore, the regime is making huge benefits at the expense of the Iranian population.

But then again, it is not surprising to see such policies come out of a regime whose leaders openly ban certified Covid-19 vaccines in order to keep casualty rates high and prevent the people from coming to the streets and hold protest rallies against the regime. Such a regime would have no qualms in rendering the lives of Iran’s impoverished population even more miserable.

Everyone remembers that for years, regime officials swore to the public that “the increase in the price of the dollar is not our job and the hand of global arrogance is at work!”

Not long ago, on January 13, regime president Hassan Rouhani said during a cabinet meeting: "The reason for the increase in the price of currency should be sought in the White House."

Abdolnasser Hemmati, the head of the Central Bank of Iran (CBI), had repeatedly denied exchange rate manipulation. In November 2020, he wrote on his social media account: “The only criterion for implementing the policies of the Central Bank is the country’s economic interests… It is not fair to talk about manipulating the exchange rate to justify coming and going and negotiations.”

Of course, these denials did not end with the head of the CBI and Rouhani alone. Last January, government spokesman Ali Rabiee reemphasized that the government had not manipulated the exchange rate. "There has never been a meeting in the government in which we do not worry about the rising exchange rate, and we did everything to bring the exchange rate down anyway. This is a pessimistic view that few political people have imposed," Rabiee claimed.

Government experts reveal the regime’s hand

Even the regime own experts and academic circles don’t support its policies, and regime-affiliated analysts have repeatedly said that the government itself is responsible for the increase in the price of currency.

"Two economists who agree with the government's manipulation of currency exchange rate theory for the budget deficit are Hossein Raghfar, a professor of economics at Al-Zahra University, and Ali Dini Turkmani. They emphasize that the government is raising the price of currency to compensate for its budget deficit," according to a May 16, 2020 report by the Fararu state-run website.

Albert Bogziyan, another economist, had also said that Hassan Rouhani’s government “is responsible for the current situation and everything is under the control of the cabinet and passes through that channel” according to a report by the Rouydad24 website on December 27.

In any case, this policy has led to a national catastrophe in the lives of millions of Iranians.

The deliberate rise in the price of currency was accompanied by a dramatic rise in the prices of cars, gold, coins, and other items on the market, all of which caused severe inflation in people’s food basket. This tragedy has forced thousands of families, who until recently could hardly provide food for themselves, to borrow bread to make ends meet. And not much can be said about how they are coping with the expenses of family members, house rent, and most importantly, providing the staggering costs of dealing with Covid-19? Many Iranians have given up on continuing their treatment.

Mahmoud Vaezi said that the government deliberately raised the price of the currency and said in media advertisements that foreign pressure was the reason for the rise in prices. And this was done for the sake of financing the government, part of which is the media, which must repeat this lie in their propaganda.

"This way, the economic logic of determining the price of currency based on market supply and demand has been completely distorted by policymaking to confirm the hypothesis that the government is involved in raising the price of currency to cover the budget deficit. Although in the past, policymakers have denied the government's alleged involvement in raising currency prices, Mahmoud Vaezi's confession reveals more realities in the field of policymaking," according to the Jahan-e Sanat daily, posted on February 27.

Following Vaezi’s remarks, Hemmati, the head of the Central Bank, tried to somehow dampen the backlash of this revelation and said: “In order to prevent misunderstanding and use of officials' words, it is appropriate to leave commenting on specialized and currency issues to the Central Bank" (Source: Fasl-e Bank website, February 26)

What’s even more ridiculous is that Vaezi retraced his steps and said: "Sanctions are being the increase in  the currency exchange rate, and I meant that the government ... has never sought to increase the price of currency and considers the high price of currency as one of the most important obstacles to governing the country." (Source: Eghtesad News, February 26)