Gholamreza Mesbahi Moqaddam, the chairman of Majlis Economic Committee, said today in Tehran that the Central Bank of Iran (CBI) has stopped supplying the foreign exchange shops with dollars, helping push the national currency, the rial, into a free fall; with rial being traded at historic lows against dollar.
Moqaddam did not explain the reasons behind the CBI move, which according to him started three weeks ago. The dramatic loss of oil revenues, the country’s major source of hard currency, due to current sanctions, is believed to be the main reason; CBI seemingly does not have enough foreign exchange available to defend the value of the national currency.
The private foreign exchange shops are officially licensed to operate by the CBI and purchase their dollars either from businesses and retail customers who want to sell or directly from the CBI. But in the country’s uncertain atmosphere, the tendency on part of businesses and ordinary citizens is to accumulate dollars and not selling them, making CBI the only reliable source for the open markets to get the bulk of their foreign exchange supplies. The CBI also uses these exchange markets to defend the value of rial, by selling large amount of dollars; a path, however, that it’s been unwilling and now reportedly unable to follow.