New rule wreaks havoc on Iran currency market
New rule wreaks havoc on Iran currency market
TEHRAN (AFP): Iran's currency exchange market was left in confusion on Saturday following the introduction of tough new government measures to try to tackle the country's economic crisis.
Nearly all private money changers in the capital remained closed or refused to conduct transactions on the first trading day of the week after the government abandoned the free exchange market and introduced new controls on capital flows in and out of Iran.
Meanwhile, unauthorized street dealers hanging around the district near the central bank traded hard currency at a rate much higher than that set by the government on Thursday before the country began its weekend.
Yesterday, many policemen took up positions around the central bank, preventing any large gatherings in front of official money changers' offices in a central district of the capital. Several people were arrested, including two witnessed by an AFP correspondent.
As part of the new regulations coming into force yesterday, all transactions will have to go through the state banking system and the dollar was fixed at a maximum rate of 3,000 rials, half the rate the greenback was trading at on the open market earlier last week.
But the greenback was priced at between 4,200 and 4,300 rials on the black market, which emerged immediately after the closure of the free market, set up two years after the end of Iran's eight-year war against Iraq.
"We don't know what we shall do now," a money changer told AFP saying "no one will be willing to sell his foreign currency at the fictitious rate" set by the government.
He said the "real" value of the dollar was "clearly more than 3,000 rials and predicted that "transactions would be undertaken clandestinely and the free market will turn into a black market."
Most of the money changers operating in Tehran exchange market rushed to the central bank to try to find out more about the new laws, according to money changers.
Foreign trade
The government has also brought foreign trade under its full control to force exporters to repatriate all their foreign earnings.
The latest decisions have sparked consternation and disbelief among industrialists and those in commerce, notably people involved in foreign trade.
"Much of the trade in the past weeks has been calculated on the basis of 5,000 to 6,000 rials to the dollar," said an exporter of food and agricultural products. "The operators will lose fortunes if they are forced to sell their dollar at the official rate."
"These measures will lead to widespread fraud. It will create a great deal of confusion in the export of non-oil products by the private sector," an Iranian expert told AFP.
The rial has lost two-thirds of its value since the start of the year, triggering galloping inflation which has doubled and in some cases tripled the prices of basic goods.
Frustrated by the economic chaos, the authorities last week said they were bringing in the death penalty to punish those engaged in economic crimes.
Some 100 MPs urged the parliament on Wednesday to "immediately" debate a proposition for the implementation of death sentences against those "who contribute to price rises" in Iran.