The rial fell to its lowest point ever against the dollar
Iranian officials, lawmakers and media have snapped their focus on to their country's sanctions-hit economy amid a sudden and accelerating plunge in the currency. © Behrouz Mehri - AFP/File
The rial fell to its lowest point ever against the dollar
Marc Burleigh, AFP
Last updated: December 21, 2011

Iran turns attention to plunging currency

Iranian officials, lawmakers and media on Wednesday snapped their focus on to their country's sanctions-hit economy amid a sudden and accelerating plunge in the currency.

The currency, the rial, was trading at 15,800 to the dollar -- its lowest point ever, and an indication of the fragility of the economy as ramped-up Western sanctions bit.

Concerned lawmakers summoned the economy minister, central bank chief and foreign ministry officials to testify on the economic situation and how Iran could weather more sanctions expected to be applied soon by Europe and the United States.

A report by Mehr news agency on Tuesday -- quickly denied by the foreign ministry -- that vital imports from one of Iran's biggest partners, the United Arab Emirates, had been cut off added to the widespread jitters and seemed to fuel the rial's slide.

The stumble by the currency undercut avowed Iranian policy to keep the rial steady against the dollar. It suggested the central bank lacked the financial firepower to bring the rate under control.

But President Mahmoud Ahmadinejad put the currency slide down to "rumours" started by profiteers and sought to reassure the public that the economy was "stable and calm," in a speech broadcast on state television.

"We are not experiencing any particular problems," he said, asserting that foreign exchange reserves were at a historic high.

On Tuesday, Ahmadinejad said "mischief from outside and inside" the country was affecting gold and currency prices, according to Iranian media.

The United States and its Western allies have in recent weeks stepped up economic sanctions on Iran, to pressure it over its nuclear programme that they believe masks an drive to build an atomic bomb, despite Tehran's denials.

Iran-US tensions have also worsened over US accusations of a thwarted Iranian plot to kill the Saudi ambassador to Washington, Iran's capture of a CIA drone, and Tehran's arrest and detention of an American-Iranian it alleges is a CIA spy.

US envoys have visited the region to demand some of Iran's neighbours also embrace the sanctions drive.

One of them, a US Treasury under secretary for terrorism and financial intelligence, David Cohen, visited the United Arab Emirates at the end of November to talk with officials on the issue.

Iranian officials are increasingly admitting that the Western sanctions are being felt, dropping previous assertions that they were having no effect.

The measures were believed to be making it more difficult on Iran's finances, notably its ability to come up with the monthly $2.5 billion for cash handouts to the population in compensation for domestic fuel and food subsidies that are being phased out.

Central bank figures quoted by Iranian media say the amount of rials in circulation has jumped 20 percent in the past five months as more money is printed.

That in turn has driven inflation sharply higher. The central bank says it is now running at 19.8 percent, but Iranians and anecdotal evidence suggest it is much higher.

The United States and Europe are expected to soon announce additional sanctions on Iran, targeting the country's vital oil sector and central bank.

blog comments powered by Disqus