The Underlying Reason of Iran’s Abolition of the Official Exchange Rate

The Underlying Reason of Iran’s Abolition of the Official Exchange Rate
The rising cost of things is now reaching unprecedented heights.The Underlying Reason of Iran’s Abolition of the Official Exchange Rate
The Underlying Reason of Iran’s Abolition of the Official Exchange Rate
The loss of Iran’s production over the previous four decades is the primary cause of the national currency’s rapid depreciation. Hundreds of factories and tens of thousands of workshops have gone out of business.

Ebrahim Raisi’s cabinet has decided to remove the official exchange rate of 42,000 rials per dollar. This decision comes as Iran’s national currency has plummeted to a near-all-time low of 305,000 rials per dollar, prompting many economists to call the action “playing with fire.”

“Playing with fire”

Hassan Rouhani, Raisi’s predecessor, implemented the so-called “official exchange rate” in 2018 to combat inflation and increase prices of critical products including medication, wheat, and animal imports.

Iran’s state media and authorities, on the other hand, have decried the low-cost government currency, claiming that it has resulted in widespread corruption and, in reality, worsened inflation.

Rouhani’s government “wasted $65 million of the national reserves under the pretext of correcting prices, plus sold all available currency,” according to Ahmad Tavakoli, a former MP.

On November 7, 2021, Fars News Agency reported that “in 2019, around $15 billion [based on the official exchange rate] was spent on importing various items.” “Aside from all of this, Rouhani’s government was virtually incapable of price control.” According to surveys, the importers embezzled roughly 5.1 quadrillion rials in that year based on the free-market exchange rate.”

dictatorship
The dictatorship has covered the production deficit with imports and contraband, destroying Iran’s economy from the ground up.

The exchange rate is suspended or removed

The loss of Iran’s production over the previous four decades is the primary cause of the national currency’s rapid depreciation. Hundreds of factories and tens of thousands of workshops have gone out of business. The dictatorship has covered the production deficit with imports and contraband, destroying Iran’s economy from the ground up. The regime requires large amounts of cash for large-scale imports, which is why it spends the majority of the country’s currency on them.

Raisi’s government is now attempting to abolish the official exchange rate in the name of fighting corruption. The true motivation, on the other hand, is to pry further into people’s wallets.

The regime wanted to abolish the official exchange rate during Rouhani’s final year in office. It predicted that it might make at least 600 trillion rials by doing so. With the present currency rate of 305,000 rials to a dollar, Raisi’s government would receive around $2 billion if the official exchange rate is suspended or removed.

 

dictatorship
Hundreds of factories and tens of thousands of workshops have gone out of business. The dictatorship has covered the production deficit with imports and contraband, destroying Iran’s economy from the ground up.

Prices would at least quintuple

The goal is to adopt a fixed exchange rate of 230,000 rials to the dollar in the hopes of cutting prices. However, because Iran’s vital items are imported at the official cost of 42,000 rials, prices would at least quintuple.

“The country’s annual imports total more than 400 billion rials. While the removal of the official exchange rate will help the government raise revenue and reduce the budget deficit, prices of imported goods, such as basic goods, intermediaries, and capital, will skyrocket,” Mohammad Lahouti, President of Iran’s Export Confederation, told the state-run Jahan-e Sanat daily on December 25.

On November 9, the regime’s current Health Minister, Bahram Eynollahi, was quoted by the state-run Entekhbat news agency as saying that if the plan is executed, it will “increase the prices of medicines.” This would be disastrous for those who use medications on a regular basis. They’ll have to sell all they own to get medicine,” he warned.

 

dictatorship
The regime requires large amounts of cash for large-scale imports, which is why it spends the majority of the country’s currency on them.

The fate of the Iranian people

“Recently, one of the government’s institutes released numbers showing that, based on the official exchange rate of 42000 rials to a dollar, the price of commodities climbed by 190 percent. The prices of products imported without utilizing the official currency rate, on the other hand, surged by 400 percent,” the state-run Mardom Salarie daily reported on December 21.

The abolition of the official exchange rate demonstrates that the regime is not ready nor capable of dealing with the underlying challenges that have gripped Iranian society. To keep their tenuous hold on power, the mullahs in Tehran need every penny to fuel their oppression, terrorist, and war machinery. They are unconcerned about the fate of the Iranian people.

budget
Two-thirds of the budget has been set aside for so-called “government-run” businesses, whose revenues and losses are not included in the bill

 

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