Date
18 August 2018
Following a run on the rial amid fears over the impact of US sanctions, Iran has announced some measures in a bid to halt the currency's slide. Photo: Bloomberg
Following a run on the rial amid fears over the impact of US sanctions, Iran has announced some measures in a bid to halt the currency's slide. Photo: Bloomberg

Iran eases forex rules in bid to buoy rial ahead of US sanctions

Iran has eased foreign exchange rules in a bid to halt a collapse of the rial currency that has lost half its value since April due to fears about US sanctions likely to be imposed this week, Reuters reports.

A state body led by President Hassan Rouhani on Sunday partially lifted a ban on the sale of foreign currency at floating rates, allowing exchange bureaux to sell at unofficial market rates for purposes such as overseas travel, the report said, citing Iranian state TV.

That reverses the decision in April to ban trading currency outside the rate of about 42,000 rials to the dollar.

Ahead of the announcement of the new measures, the rial gained slightly on the unofficial market, trading at 98,500 to the dollar, compared with 103,000 on Saturday.

Central bank governor Abdolnaser Hemmati said the plan reflects Iran’s self-confidence in the face of the looming US sanctions.

“This shows our power. The same day you (Americans) impose sanctions we open our economy. We have no problems, so why should our people worry?,” Hemmati said in a live televised interview.

Hemmati said the central bank will allow a “managed float” of the rial’s exchange rate and try to avoid using up its reserves to support the currency.

“The central bank will try not to interfere in setting the price of hard currencies, which will be determined by supply and demand. However, the bank’s supervision will prevent unbridled (market swings) and the creation of a black market,” Hemmati said.

To encourage Iranians to return their hard cash to the economy, the plan allows the central bank to set up dollar savings accounts for ordinary people, state television said.

Non-oil exporters will be allowed to sell hard currency to importers, and there will be no limit on bringing currency or gold into the country.

Hard currency will be made available at a subsidized rate for purchases of basic goods and medicine, state television quoted a government statement about the plan as saying.

In July, Iran opened a secondary foreign-exchange market for importers of non-essential goods that are not eligible to receive the preferential rate from the central bank.

US President Donald Trump’s decision to pull out of an agreement to lift sanctions in return for Iran limiting its nuclear program caused a run on the rial as companies and savers bought hard currency to protect themselves from the economic sanctions that could be imposed from Monday.

The currency plunge and soaring inflation have sparked sporadic demonstrations against profiteering and corruption, with many protesters chanting anti-government slogans.

Starting this week, Washington will re-impose sanctions on Iran’s purchases of US dollars, its trade in gold and precious metals, and its dealings with metals, coal and industrial-related software.

Washington has told third countries they must halt imports of Iranian oil from early November or face US financial measures, the report noted.

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RC

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