DUBAI, (Reuters) – Iran launched a fresh bid on Monday to stabilise its falling currency, opening a foreign exchange centre that provides government-subsidised U.S. dollars to import some goods as the country struggles with Western economic sanctions.
The rial’s street value has tumbled by more than half in the last year because of U.S. and European sanctions against Iran’s oil and banking sectors, which have cast doubt on the central bank’s ability to defend its currency.
Iranians have rushed to informal money changers to convert their savings into hard currencies, driving down the rial’s open-market value. This has raised the price of imported goods, contributing to double-digit inflation.
The new foreign exchange centre allows importers of goods including truck tyres, construction equipment and synthetic fibres to buy dollars at a rate 2 percent cheaper than the street rate at any given time.
The government plans to use revenues from petrochemical sales and 14.5 percent of its oil revenues to provide dollars for the centre, central bank governor Mahmoud Bahmani said on Sunday, according to the newspaper Aftab. He did not give an absolute figure for the amount of dollars to be supplied.
“With the distribution of currency in this centre, the exchange rate in the market will go down, because some of the demand (for dollars) will be met in this centre and the pressure of demand will be removed,” Bahmani was quoted as saying.
The dollar sold for 24,040 rials at the centre on Monday, the Iranian Students’ News Agency said, compared to about 24,600 on the open market at around the same time, according to currency-tracking website Mesghal.
The foreign exchange centre is the latest in a series of plans floated by the government in the last three months to address a burgeoning currency crisis, for which legislative foes of President Mahmoud Ahmadinejad have blamed his administration.
The government maintains an official “reference” rate of 12,260 rials to the dollar, but only a limited amount of foreign exchange is available at this rate.
Iran’s oil sales, its chief source of hard currency, have plummeted this year as a result of the sanctions, and legislators accused the central bank earlier this month of not injecting enough dollars into the market, thereby contributing to a fresh fall in the rial.
The foreign exchange centre appears to have replaced a previous plan to establish a currency trading market, a proposal that was fiercely criticised by the private sector, which said the scheme would simply introduce yet another rate for the rial and bring more chaos to the economy.