The consequences of USD rate jumping in Iran

The consequences of USD rate jumping in Iran

Head of the Trend Persian service Dalga Khatinoglu

Rising USD rate by 40 percent and more than 45 cents difference between the rate in the open market and official statistics in Iran caused some serious confusion.

Iranian Mehr News Agency reported on Wednesday, that rising USD is happening with out any obstacles. According to the stats of Iran's Central Bank, the USD rate is 11,000 rials, while USD rate in the open market it is 16,000 rials.

Just two days ago, the rate was 14,250 rials, while this figure was 10,600 rials last year.

Liquidity and bank interest

One of the major causes of increasing USD rate is the existence of high liquidity in Iran, which has exceeded equal to over $300 billion, according to the latest statistics by the Central Bank of Iran show.

Iranian government cut the subsides since December 2010 and pays more than $3 billion of cash subsides to citizens per month. International Monetary Fund says Iran's liquidity growth in 2012 will reach 15.9 percent as well. Increasing liquidity results in boosting inflation rate and causes the decline of national currency.

Considering that the bank interests in Iran are lower than the inflation (which is 20 percent), being economic risks in the industry investment sector and the continuity of the downturn in housing market with 15 percent increase in house construction expenses, have led to huge amounts of loose liquidity being directed to foreign exchange and gold markets.

Sanctions on Iran's nuclear program

International sanctions on Iran's disputed nuclear program resulted in tightening the country's trade bottleneck based on USD. Transferring USD to Iran has faced major obstacles.

For example India, that was importing 400,000 bpd of oil from Iran last year, faced a problem of transferring oil money to Iran after a ban imposed on India Central Bank to make trades with Iran using the Asian Clearing Union, and this caused a gathering of 5 billion debts based on USD of Iranian oil imports.

India paid off its debt after 6 months by Turkish banks, however, the problem of transferring USD to Iran still remains and India's oil import from Iran decreased to 350,000 bpd.

Earlier, Mehrdad Emadi, the economic advisor of Europe Union said during an interview with Trend that similar problems exist with China.

"Iran has to sell more than 500, 000 bpd of crude to China based on yuan, not USD", he said.

United Arab Emirates, having a $15 bln trade turnover with Iran in 2010, had to tighten transferring the USD to Iran, which led to suspend two country's trade for a day on Dec.21. All of this is happening due to the pressure coming from the U.S.

Iranian Government's interest

Some Iranian Parliament members have warned about government's $15 billion budget deficit for current solar year (started on March 21). Head of Supreme Audit Court Abdolreza Rahmani Fazli said earlier that the government borrowed $5 billion from Central Bank of Iran, while $5 bln was allotted out of public budget and $3 billion from oil revenues illegally to pay off cash subsidies.

Central Bank of Iran is obliged to supply open market with USD and the more is the USD price, the more CBI gains. Silence of CBI against rising USD is likely, because of its huge financial interests.

However, falling of Iranian national currency would damage its suffered economy by sanctions.

The sudden rise of inflation rate resulted in jumping of the USD rate, especially without boosting the country's export this can lead to economic crisis and serious consequences.

The only benefit of rising USD in Iran is to help boost the export, because of falling the cost of internal produced goods compared to abroad and the it will be easier for Iranians to compete in international markets.

Non-oil export shares only about 15 percent of Iran's total export, and the question how Iran can boost its exports, is left open.

French Development Agency to fund construction of Uzbek hydropower plants
French Development Agency to fund construction of Uzbek hydropower plants
Uzbekistan permits flights for Abu Dhabi low-cost airline
Uzbekistan permits flights for Abu Dhabi low-cost airline
Industrial production to be increased in Uzbek regions
Industrial production to be increased in Uzbek regions
Loading Bars
Valentina Matviyenko: Azerbaijan has been and remains strategic partner for Russia
U.S. COVID-19 deaths top 200,000 -- Johns Hopkins University
MP: Azerbaijan to give worthy response to any provocations of Armenia
Azerbaijani finance ministry’s securities in great demand
Cargo transportation volume through "Middle Corridor" by late 2020 disclosed
China's exports of flat-rolled products of non-alloy steel to Georgia down
Georgian expert: Azerbaijan harmoniously combines three world religions
Geostat reveals volume of Russian export to Georgia
Speaker of Azerbaijani parliament meets chairperson of Federation Council of Russian Federal Assembly (PHOTO)
Georgia reveals volume of processed grapes by regions
Georgia reveals export statistics of major goods to Russia
Israeli city vice-mayor: Azerbaijan highly appreciates tolerance
Baku Port: New transport corridors of Caspian Sea increases Middle Corridor's role
Iranian Energy Exchange announces products to be on sale September 23
French Development Agency to fund construction of Uzbek hydropower plants
Review of Georgian exports to China
Red Cross representatives visit Dilgam Asgarov, Shahbaz Guliyev
Turkish president: Armenia - biggest obstacle to peace in South Caucasus
Kazakhstan to greatly increase level of automation of public services
Azerbaijan's AzInTelecom supports creation of new mobile app
Purchase of wheat in Iran's Sistan and Baluchestan Province completed
Uzbekistan permits flights for Abu Dhabi low-cost airline
Georgian company AgroKartli expect to increase apple crop
New ambassador of Netherlands to Azerbaijan arrives in Baku
Azerbaijan eyes to open two more DOST Centers till late 2020
Azerbaijan's ADY Express reveals cargo handling volumes via BTK railway
Georgian Railway sees increase in cargo transportation
Germany increases export volumes to Kazakhstan despite COVID-19
Industrial production to be increased in Uzbek regions
Uzbekistan boosts import of grain, legumes from Turkey
Azerbaijani First VP Mehriban Aliyeva attends opening of new kindergarten (PHOTO)
ADIF discloses amount of сompensations made to clients of closed banks
Kazakhstan Air Astana to resume direct flights to Russia
IRI's International Assessment Team Arrives Ahead of Georgia’s Parliamentary Elections
Iran’s NISOC can increase extraction coefficient
Kazakhstan's progress on cereals and legumes harvesting revealed as of Sept.22
Bahar Azadi gold coin price climbs
Azercosmos begins cooperation with ViewMedia
National Bank of Georgia to sell funds at foreign exchange auction
COVID-19 pandemic negatively affects Georgian Sarajishvili's company
Ceramic plant being prepared to launch in Turkmenistan’s Lebap region
Iran Customs Administration to facilitate release of imported goods
Azerbaijan to upgrade local hydrological networks
Construction of new apartments across Iran's towns going full speed
Int'l community must stop terror carried out by Armenia against Azerbaijan - Lebanese lawyer
Review of Georgian livestock export to Azerbaijan
More Kazakh citizens sent back home from Azerbaijan by sea
Azerbaijani First VP Mehriban Aliyeva attends opening of new building of Children’s Art School in Bulbula settlement (PHOTO)
Georgia plans to create low-cost airline
Volume of cotton fiber exports from Azerbaijan revealed
Turkmengas to purchase chemical products via tender
Iran discloses number of small mines restored
Uzbekistan considers joining research of vaccine for COVID-19
Iran increases amount of foreign currency assigned to importers
Siemens sees market value of energy spin-off above $20 billion
Produce in Georgia agency to begin accepting applications for its Micro and Small Business Support Program
Uzbekistan increases electric cars import
Iran’s Khouzestan Steel Company reaches new production level record
“Protect the Caspian Sea” with support of Bakcell and its partners (PHOTO)
Updates on Uzbekistan’s nuclear progress
EY Azerbaijan officially announces the start of the ‘EY Entrepreneur Of The Year™’ 2020-2021 competition
Subsidiary of KazMunayGas to buy diesel fuel via tender
Cement imports by US from Turkey slightly up amid COVID-19 pandemic
IMF: Economic growth in Uzbekistan to be positive due to growth in construction sector
Azerbaijan's CBA discloses amount of foreign currency bought by local banks
Russia lowers import of Turkish clothes
Geostat reveals volume of citrus fruits exported by Georgia to Azerbaijan
Romanian WEVO company implementing state projects in Azerbaijan (PHOTO)
WTL ready to implement new project in Turkmenistan
Review of Georgian corn export to Azerbaijan
Azerbaijan has right to liberate its lands by military means - Turkish general
Azerbaijan confirms 113 more COVID-19 recoveries
Value of exports from Iran's Maragheh County revealed
Georgian corn oil to enter local market
ROMGAZ moves towards becoming active player on natural gas distribution market
Azerbaijan's Energy Ministry reveals data on gas production, export
Iran reveals its COVID-19 data for September 22
Youth Union of New Azerbaijan Party issues appeal regarding Armenian provocation
PACE rapporteurs welcome decision to release Tofig Yagublu to house arrest
Oil rises on expectations demand can survive new lockdowns
Azerbaijan reveals oil production, export figures for ACG, Shah Deniz field
Electricity potential of Iran's thermal power plants up
Demand for Turkish electrical goods in China down
Turkmenistan, France's MEDEF considering priorities for infrastructure dev't in country
Greece plans to properly exploit fact of receiving natural gas from Azerbaijan
Iran inaugurates new healthcare centers
Kazakhstan's postal service operator to buy spares via tender
Documents on archiving pension files to be in e-format in Azerbaijan
Kazakhstan, France trade down twofold amid COVID-19
Iran’s Tehran Oil Refining Company to boost its capital
Microsoft Azerbaijan talks about cybersecurity within country
Azerbaijani president congratulates King of Saudi Arabia
Azerbaijani president’s interview to local TV channels in spotlight of foreign media
Armenia - threat to international peace and law, Iranian lawyer says
Italian geopolitical analyst: Azerbaijan is a platform of intercultural, intercivilizational dialogue
Group of insurance experts created in Azerbaijan
Two types of overpasses built on Georgian section of BTK
Equinor increases its improvement ambition by 50%
Gold price declines in Azerbaijan
UK and U.S. exchanged tariff offers during trade talks
All news