Iran bans unofficial money trade after rial fall

TEHRAN - Reuters

After new US sanctions triggered a currency crash, Iran’s parliament cracked down on unofficial money traders on Sunday. REUTERS photo

Iran’s parliament cracked down on unofficial money traders on Sunday after new U.S. sanctions helped trigger a currency crash as Iranians rushed to buy dollars.

The rial lost about 20 percent of its value against the dollar before the central bank intervened last week by injecting hard currency into the market. At a special parliamentary debate, lawmakers passed a measure imposing legal penalties on touts who sell foreign currencies outside official exchange offices and banks where rates can be subjected to government controls.

The measure may scare away touts, a common sight in parts of Tehran where they wave wads of currency at passing motorists. But it will have no immediate impact on the price most Iranians have to pay for dollars which, even at licensed exchange offices, sell at a 40 percent premium over the central bank’s “reference rate.”

Currency slide due to inflation say economists

Economists say the currency slide is due to fears about inflation, 20 percent and rising, eroding the rial’s buying power and to the effect of western sanctions making it harder for Iranians to get hold of foreign currencies.

Sanctions approved by U.S. President Barack Obama on New Year’s Eve added to demand for dollars, pushing the rial to an all-time low last week. The new measures would cut off any bank around the world from the U.S. banking system if they do business with Iran’s central bank.

“The sharp fluctuation in the foreign exchange market prices stems from the central bank and the government’s weak management,” said Gholam-Reza Mesbahi-Moghaddam, head of parliament’s special economic reform committee.

“We have to put the management of the central bank in the hands of a competent man,” he said, a swipe at Governor Mahmoud Bahmani, who was criticized for failing to attend the session.