Iran rial slides to new low as coronavirus, sanctions weigh

The rial lost about 70% of its value in the months after May 2018 as Iranians snapped up dollars. (File/AFP)
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Updated 04 July 2020

Iran rial slides to new low as coronavirus, sanctions weigh

  • The dollar was offered for as much as 215,500 rials, softening from 208,200 on Friday
  • The rial lost about 70% of its value in the months after May 2018 as Iranians snapped up dollars

DUBAI: The Iranian rial fell to a new low against the US dollar on the unofficial market on Saturday, as the economy comes under pressure from the coronavirus pandemic and US sanctions.
The dollar was offered for as much as 215,500 rials, softening from 208,200 on Friday, according to foreign exchange site Bonbast.com. The economic daily Donya-e-Eqtesad’s website gave the dollar rate as 215,250, compared with 207,500 on Friday.
In May 2018, President Donald Trump withdrew the United States from a multilateral deal aimed at curbing Iran’s nuclear program and reimposed sanctions that have since battered the economy.
A drop in oil prices and a slump in the global economy have deepened the economic crisis in the country, which also has the highest death toll in the Middle East from the pandemic.
The rial’s decline has continued despite assurances from Iranian Central Bank Governor Abdolnaser Hemmati last week that the bank had injected hundreds of millions of dollars to stabilize the currency market.
The rial lost about 70% of its value in the months after May 2018 as Iranians snapped up dollars, fearing Washington’s withdrawal from the nuclear deal and sanctions could shrink vital oil exports and severely impact the economy.
The official exchange rate is 42,000 rials per dollar and is used mostly for imports of state-subsidised food and medicine.


Turkey on brink of recession as economy collapses

Updated 13 August 2020

Turkey on brink of recession as economy collapses

  • Consumer debt has increased by 25 percent to more than $100 billion in the past three months

JEDDAH: President Recep Tayyip Erdogan’s popularity is plunging in lockstep with Turkey’s collapsing economy and the country is on the verge of a potentially devastating recession, financial experts have told Arab News.
The value of the Turkish lira has fallen to 7.30 against the US dollar and the central bank has spent $65 billion to prop up the currency, according to the US investment bank Goldman Sachs.
Consumer debt has increased by 25 percent to more than $100 billion in the past three months as the government moved to help families during the coronavirus pandemic, but the result has been a surge in inflation to 12 percent.
With the falling lira and increased price of imported goods, the living standards of many Turks who earn in lira but have dollar debts have fallen sharply.
The economy is expected to shrink by about 4 percent this year. The official unemployment rate remains at 12.8 percent because layoffs are banned, although many experts say the real figures are far higher.
To complete the perfect storm, tourism revenues and exports have been decimated by the pandemic, and foreign capital has fled amid fears over economic trends and the independence of the central bank.
Wolfango Piccoli, of Teneo Intelligence in London, said logic dictated an increase in interest rates but “this is unlikely to happen.”
Piccoli said central bank officials would strive to avoid an outright rate hike at their monetary policy meeting on Aug. 20. “A mix of controlled devaluation and backdoor policies, such as limiting Turkish lira’s liquidity, remains their preferred approach,” he said.
There is speculation of snap elections, and Erdogan’s view is that higher interest rates cause inflation, despite considerable economic evidence to the contrary.