Azerbaijan, Baku, Oct. 1 /Trend, D.Khatinoglu/
The dollar rate in Iran has increased by 20.98 percent over two days (Sept. 28-29). One dollar equaled 12,400 riyals (national currency of Iran) in the monetary market on Wednesday, ILNA news agency reported. Two days earlier, the course was equal to 10,250 rials per dollar.
A former consultant of the Central Bank of Iran Bijan Bidabadi told Trend that the government's plan to stop subsidies in Iran and transfer the funds allocated for grants to the bank accounts of the population requires intervention of a huge amount of national currency in the monetary market. Thus, it would lead to an increase in inflation in the country, cheapening in the value of national currency and raising in the foreign currency.
According to Bidabadi, the possible decline in the value of the national currency in Iran intensifies the process of increase in the demand for U.S. currency and the exchange of national currencies for dollars. "The deficit in dollar in the monetary market led to an increase in the rate of dollar," says the consultant.
Iranian authorities intend to abolish subsidies for energy and some foods. Currently, Iran has set limits on gasoline sales, the daily production of which in the country is 63 million liters. Taking into account the subsidies, one liter of gasoline costs 10 cents, and freely is available for 40 cents. Eliminating subsidies, Tehran plans to sell each liter of gasoline for 50-60 cents. In addition, to bring the price of bread, electricity, water and gas to real, the authorities plan to eliminate subsidies in these spheres.
Another Iranian expert who lives in the U.S., a professor of economics at Northeastern University Kamran Dalhah believes that in addition to the removal of subsidies, the rise in the dollar value was affected by strikes with regards to taxation in the gold market in Iran. Several months ago, information spread about the government's plans to increase taxes in the gold market in the country. Since last week, businessmen, engaged in gold trade, have begun a temporary strike in Tehran and other cities.
Experts believe that the sanctions, removal of subsidies and the tense situation in the gold market have played the role in raising the dollar value, but there is a possibility that the authorities have a hand in this.
The reason for the sharp increase in the dollar value in recent days was several factors, Dalhah wrote in an e-mail to Trend. "The first factor is the international sanctions against Iran's nuclear program, which created difficulties for the activities of Iranian businessmen in the world. The second factor is the dissemination of news that in the near future the government will resist the import of certain goods and materials," said Dalhah.
İRNA news agency reported that the Iranian Vice President Mohammad Reza Rahimi said that the Central Bank will provide a large batch of gold and U.S. currency to the market, and buyers will be able to buy gold and dollars at a lower price from the Central Bank of Iran.
However, according to Bidabadi, the government should not interfere in the change of the dollar rate. "The sharp increase in the dollar rate in Iran as the bubble bursts in the near future. The government should not provide large quantities of gold and dollars to the market. We only have to wait, when the rate will stabilize itself. And then the dollars will be put up for sale in a certain amount, " said Bidabadi.
According to both experts, the increase in the dollar exchange rate is favorable to the authorities, but the artificial depreciation of this currency only harms the country.
According to Bidabadi, to increase exports and production, the government should try to raise the dollar value. He believes that the rise of the dollar is probably the deliberate intervention of the authorities in the currency market. According to Dalhah, rise of the dollar in Iran occurred in the free market zone, where the main control is made over foreign currency rates. The main source and support of this market is the government, which pours all oil revenues into this market, thereby artificially keeping the dollar low.
"At first glance it seems that the government specifically reduced the amount of foreign currency in the domestic market, said Dalhah. - In order to support local producers and exporters, the government still can gradually increase the dollar rate."
According to him, the government's keeping foreign currencies at a low level is beneficial only for importers, but it harms local producers and exporters. Moreover, this assistance can be in the short term keep inflation and commodity prices at low level, but it would damage the economy, especially local producers in the long-term period.