Analysts: Iran Central Bank fails to calm market

Analysts: Iran Central Bank fails to calm market

Azerbaijan, Baku, Feb.1/ Trend T. Jafarov/

Despite higher interest rates for deposits and a single rate for foreign currencies, Iran's gold coin and foreign currency markets are still chaotic. Experts are convinced that the instability is rooted in Iran's economic issues and the Central Bank of Iran (CBI) can't control the market through circulars and orders.

Fereydoun Khavand, a Paris-based economist and analyst, told a reporter from Trend he believed the dollar costs 18,300 rials today and the CBI's attempt to impose its rate on the market failed because it was unreasonable and unrealistic to set the price for the dollar at 12,260 rials when it was valued at more than 20,000 rials.

On Thursday, 6th of Bahman, (January 26), Mahmoud Bahmani, head of the CBI, announced that starting on Saturday the bank would operate based on a single rate for the dollar. The CBI chief said after calculations by specialists, 12,260 rials would be the equivalent of one dollar.

Over the past month, Iran's gold and foreign currency markets had been chaotic and the rial's value against the dollar had plunged by 50 per cent.

In response to these fluctuations, the CBI announced last week deposit interest rates would go up and a single rate would be set for foreign currency. The bank said currency traders were not allowed to sell money at rates higher than what had been set. These measures brought down the gold coin and dollar prices a little.

According to reports, while the currency bureaus cite the CBI's official rate on its exchange boards, they refuse buying and selling the dollar at the bank-imposed price. Meanwhile, crowds are forming in front of banks selling foreign currency.

The dollar costs 18,200 rials in Iran's free markets at this time.

Mr. Khavand contends that as long as demand for foreign currency is high in Iran's market its price won't drop.

"Demand for foreign currency is relatively high in Iran. Importers, manufacturers, those wishing to leave the country, those traveling abroad for medical treatment and, most of all depositors need dollars and other foreign currency and their rush toward the market drives up currency prices," said Mr. Khavand.

The economic analyst is convinced the CBI doesn't have enough foreign currency and has difficulty supplying the market with the dollar. This prevents it from actually being able to execute its single-rate policy and keeps foreign currency prices high.

Ali Mazrui, a Belgium-based journalist and Iran analyst, agrees that the disarray in

Iran's gold coin and foreign currency market stems from economic problems that are dependent on supply and demand and cannot be controlled by proclamations.

In an interview with Trend, Mr. Mazrui pointed to the government's flawed economic policies as the reason behind higher demand in the foreign currency market, economic insecurity and instability and inflationary expectations, "To maintain their purchasing power, people rush to the market and demand surpasses supply causing prices to go up."

Jamshid Pajooyan, an economic analyst and head of the National Competitiveness Council, agreed in an interview with Trend that edicts can't control the market's instability and prices. But he contends the key issue in Iran's currency market turmoil is an agitation that can't be explained in economic terms.

"There is no problem with foreign exchange revenues or the central bank's balance of foreign currency which means there's no economic justification for the higher prices," said Mr. Pajooyan, "By fuelling rumours and profiting from currency exchange fees, some have created a demand that is anticipatory."

He agreed the government had made some mistakes and said, "Policies to combat higher foreign exchange prices weren't issued in time."

Mr. Pajooyan believes the higher interest rates for deposits can be a factor in stabilising the market, but they will take time.

The CBI's Monetary and Credit Council increased bank deposit interest rates to 21 per cent in early January. Before the Council's announcement, banks' interest rates were 15 per cent for five-year deposits. The Monetary and Credit Council hasn't made a decision yet about short-term deposit's interest rates.

Fereydoun Khavand, economist and economic analyst concurs that the Central Bank's move to increase deposit interest rates came late and won't return the market to its normal conditions.

"Economic experts have said for many years that deposit interest rates in Iran have to be higher than the inflation rate to encourage depositors to save their money in banks. This initiative is a little late because those who deposited their money with banks have seen it lose half of its value in dollar terms. So I don't think depositors would be willing to leave their money with banks again because of higher deposit rates."

Georgia updates environmental targets with support from EU4Climate project
Georgia updates environmental targets with support from EU4Climate project
Production of electric cars in Iran needs more motivation - ministry official
Production of electric cars in Iran needs more motivation - ministry official
Georgia negotiating with South African, Polish companies to manufacture military UAVs
Georgia negotiating with South African, Polish companies to manufacture military UAVs
Loading Bars
Improved coronavirus conditions lead to further relaxation of restrictions in Cyprus
Israel's annual inflation up 0.8 pct, highest in nearly 2 years
Chairs of Azerbaijani Parliament, Turkish National Assembly talk issues of mutual interest
COVID-19 kills 202 more Iranians over past 24 hours
Lithuania gifts 15,000 Covid-19 vaccines to Georgia
Turkey to gradually relax COVID-19 measures, normalcy in June
President Tokayev receives Finnish Minister for Development Cooperation and Foreign Trade
First Vice-President Mehriban Aliyeva made another post from Karabakh (PHOTO/VIDEO)
Germany's COVID-19 incidence rate drops below 100 for first time in two months
Georgia updates environmental targets with support from EU4Climate project
Azerbaijani FM, high-ranked EU official discuss Armenian-Azerbaijani border situation
Extra costs to air fares for PCR testing almost double flight cost - IATA
SOCAR to supply Rosneft’s oil products to Baltic states, Ukraine, Poland
Google leads U.S. business push to preserve work permits for H-1B spouses
Production of electric cars in Iran needs more motivation - ministry official
Azerbaijan, US exchange views on Armenian-Azerbaijani border situation
Azerbaijan shares data on number of vaccinated citizens for May 14
Georgia negotiating with South African, Polish companies to manufacture military UAVs
Second batch of Sputnik V vaccine expected to be delivered to India by end of the week
London May cocoa expiry sees 72,230 tonnes tendered
Azerbaijan confirms 326 more COVID-19 cases, 1,262 recoveries
Azerbaijan names date of issuing tickets for UEFA EURO 2020 matches in Baku
Afghan president calls Azerbaijani president
Wizz Air joins airlines cancelling Tel Aviv flights
Georgia receives financing from WB toward cost of energy supply reliability
More Azerbaijani enterprises to export tomatoes to Russia
'Lancet report on India COVID-19 response another attempt to undermine developing country's ability to challenge big pharma's monopoly'
Kazakh telecommunications company opens tender to buy station for wells management
Russia reports 9,462 daily COVID-19 cases
Azerbaijani MoD names number of commissioned military units in liberated areas (PHOTO)
Total assets of INPEX rise in Q1 2021
INPEX sees decrease in net natural gas sales
INPEX Corporation increases net sales of crude oil
Turkish company Chalik Holding to build new wind farm in Georgia
No oil deliveries planned from Azerbaijan to Belarus in May
Revenues of Azerbaijan State Maritime Agency decrease
Kazakhstan's ERG eyeing more investments into future projects
Kazakhstan sees decrease in trade with Netherlands
Kazakhstan, France discuss fuel energy cooperation prospects
Georgia reports 1,390 new cases of coronavirus for May 14
France's Macron to go down in history as killer of OSCE Minsk Group
Airbnb bookings jump 52% as vaccinations spur vacation rental demand
SOCAR ready to share capacity of Southern Gas Corridor with Turkmenistan
Kazakhstan decreases exports to Hungary
Azerbaijani oil prices decline
Russian IrAero to launch flights to Azerbaijan soon
Zulfiya Khanbabayeva to be the next narrator of Nar's ‘Reading hour’ project (PHOTO)
Apple supplier Foxconn reports Q1 profit T$28.2 bln, beats estimates
Kazakh gas supply company opens tender for pipeline maintenance
Georgia reveals rating of its largest wine and spirits companies
Georgian Geofresh company eyes Europe, Dubai to expand exports
Georgian Adjara creating new platform for tourism development
Turkey discloses number of ships received by Tuzla port
Turkish ministry discloses volume of cargo handled through Bartin port
Sweden, WB supporting Georgia by addressing wastewater treatment challenges
IMF underlines successfully completed four-year extended program in Georgia
Georgia considers opening of land borders
UN Secretary General calls for immediate cessation of hostilities in Gaza Strip and Israel
Kazakhstan requires sustainable management practices for natural resources - UNIDO
Iran’s FM meets with Spanish counterpart
Kazakhstan reports 2,549 more COVID-19 cases, total at 353,140
Turkey reports 11,534 new COVID-19 cases, 5,083,996 in total
6.0-magnitude quake strikes off Japan's Fukushima Prefecture, no tsunami warning issued
Colonial Pipeline restarts entire pipeline system - company statement
Hamas launches 100 more missiles in direction of Ashkelon
More than 745,000 COVID-19 infections detected worldwide over past 24 hours - WHO
UN Security Council to hold open session on Israel and Gaza Strip on May 16
Oil prices drop as U.S. pipeline resumes operations
Latvia eases entry rules for vaccinated travelers
Three rockets launched toward Israel from Lebanon, no damage -Israeli military
Africa's COVID-19 cases surpass 4.66 mln
Over 500 residential buildings razed by Israeli airstrikes in Gaza Strip
Azerbaijani Foreign Ministry issues statement on tension on Armenian-Azerbaijani border
China's Qinghai donates anti-pandemic supplies to Kyrgyzstan
Azerbaijani FM talks tension on Azerbaijani-Armenian border with OSCE Chairman-in-Office
Georgian's commercial banks see increase in number of total loans
Azerbaijani, Russian FMs exchange views on tensions on Azerbaijani-Armenian border
Overseas election headquarters established at Iran’s foreign ministry
Sputnik V approved for use in Republic of Maldives
Azerbaijan shares data on number of vaccinated citizens for May 13
Azerbaijan confirms 509 more COVID-19 cases, 1,427 recoveries
COVID-19 cases decrease in 80 Turkish provinces in a week
Tajikistan delegation to visit Uzbekistan on May 14
Gaza death toll jumps to 84 as Israeli air raids intensify
Musk decries bitcoin's 'insane' energy use after Tesla payment U-turn
Azerbaijani president got touched by National leader Heydar Aliyev's words about Shusha (VIDEO)
Azerbaijani president once again says at Jidir Plain in Shusha - Karabakh is Azerbaijan! (VIDEO)
EU countries urged to halt non-essential travel from India
U.S. weekly jobless claims fall
Gaza flare-up further weakens shekel
Georgia increases aviation fuel imports
Iran ready to have closer ties with Saudi Arabia, FM says
Azerbaijan’s import of goods from Italy down
Iran talks insurance data in its mining sector
Turkish ministry discloses volume of cargo handled through Mersin port
Georgia adopts new rule on forest use
Kazakh Senate adopts document on economic relations with Kyrgyzstan, within EAEU
Volume of chemical products exported by Turkey to Azerbaijan disclosed
KazTransOil completes connecting newly constructed sections to Uzen-Atyrau-Samara pipeline
Trade ministry discloses volume of cereals imported by Kazakhstan from Turkey
All news