Iranians Cautioned against ‘Frenzied Behavior’ as Rial Dips - UPDATES

Iran’s Minister of Economy Ali Tayyeb-Nia cautioned against “frenzied behavior” on Monday after the national currency rial traded at its lowest value since Rouhani was elected president in June 2013. Rial’s free market rate against the dollar was at 35,000 on Sunday, although it has recovered in value in intra-day trading on Monday.

“There has been no fundamental change in the foreign exchange and the investment markets, and we expect to create a stable situation in currency and investment markets,” Tayyeb-Nia said (ISNA/Reuters, 1 December)

Official news agency IRNA also quoted Tayyeb-Nia as saying that people should not exhibit “frenzied behavior.”

Externally, the rial is under pressure by plunging oil prices, the worst since the collapse of financial system in 2008, with Brent crude trading at $69 a barrel on Monday. Internally, the market seemed to have lost confidence in Rouhani’s economic reforms and his ability to lift sanctions.

Meantime, consumers in Iran woke up on Monday to bread prices 30 percent higher than yesterday, Fars News Agency reported. Bread is a principle dietary staple in the country, and any sharp rise in its price could create a public backlash against the government.

UPDATE: After the minister's announcement that the government will defend rial, the central bank (CBI) poured large amounts of dollars into the country's Forex free market, purchasing rial to stabilize the currency. the extent of CBI's intervention was not clear, but subsidizing the currency could be very costly.

UPDATE (Wed 3 December): The exchange rate is back to 35,000 rials a dollar, wiping out the gains it made in the past two days.

Don’t Expect Quick Lifting of Sanctions – Iran Economy Minister

Iran’s Minister of Economic Affairs and Finance Ali Tayyeb-Nia today cautioned against the expectations of a quick removal of the sanctions against the country.

“If we hope that the sanctions would be lifted in the near future and a breakthrough would occur, it would be wishful thinking, because the removal of the sanctions is a long-term process,” Tayyeb-Nia said. (IRNA/Press TV, 6 October)

Tayyeb-Nia yesterday announced that Iran’s inflation rate has climbed to 40 percent, and his comments today is a warning not to wait for lifting of sanctions to address serious economic woes facing the country. It is not clear, however, if the economy can respond to any stimulus plans by the government short of the lifting of oil and banking sanctions.

File photo: Iran’s Minister of Economic Affairs and Finance Ali Tayyeb-Nia. (IRNA)