The dollar traded at nearly 2.7 million rials on Tuesday, after crossing the psychologically important threshold of 2.5 million last week, despite repeated efforts by authorities to contain the currency’s decline.
Central Bank Governor Abdolnaser Hemmati said Monday that the bank would take whatever measures it deemed necessary to manage the foreign exchange market.
The central bank announced on Sept. 30 that it would offer up to $2 billion in banknotes at a rate below the free-market price, beginning with $1 billion sold through selected banks and bank-affiliated exchange offices. Individuals can buy up to $10,000.
The rial’s decline has intensified public anxiety over the cost of living and the value of savings. Iranian news sites now routinely publish daily prices not only for currencies, gold and cars but even staples such as meat.
‘Structural problems’
Economists have questioned whether selling dollars can have more than a temporary effect while the forces driving the currency’s decline remain unchanged.
Kamran Nadari, an economist and university professor, told Rokna that the intervention could temporarily stabilize the exchange rate if its purpose was to meet speculative demand.
“The main problems in the foreign exchange market are declining foreign currency revenues, difficulties in transferring money and sanctions,” Nadari said. “Selling banknotes cannot solve these structural problems.”
He also warned that selling dollars below the free-market rate creates an opportunity for arbitrage, allowing buyers to obtain currency from the central bank and resell it for a profit.
“As a result, part of these $2 billion could go toward speculation and arbitrage rather than meeting genuine demand,” he said.
Hardliners attack the policy
The intervention has also triggered unusually strong criticism from hardliners in parliament.
Mehdi Kuchakzadeh, a prominent member of the hardline Paydari Party, argued that ordinary Iranians struggling with living costs could not afford the roughly 25 billion rials needed to purchase the maximum $10,000 allocation.
He called the central bank’s action a “crime” and urged parliament to intervene immediately.
“If I were not afraid of hell because of the shortcomings I have committed against you, the people, I would set myself on fire in front of the central bank,” Kuchakzadeh said.
Parliament Speaker Mohammad-Bagher Ghalibaf said he agreed with Kuchakzadeh’s concerns and would personally follow up on the issue, which he said could be raised at a parliamentary oversight session.
Rouhollah Abbaspour, a member of parliament’s Industries and Mines Committee, argued that the program would primarily benefit people with money to invest, who could also pay others to use their national ID cards to obtain additional dollars.
A fight over scarce dollars
The conservative newspaper Jomhouri Eslami described the policy as putting $2 billion of Iran’s foreign reserves “up for auction.”
It questioned the decision as Iran contends with reduced oil sales, difficulties repatriating export earnings and increased government costs from war-related destruction.
The criticism strikes at a broader vulnerability for Tehran. Oil exports have been heavily constrained by the US maritime blockade, depriving Iran of its principal source of foreign currency just as the rial has fallen to successive record lows.
Tabnak, a website considered close to former IRGC commander and National Security Council secretary Mohsen Rezaei, described the measure as “Hemmati’s controversial gift to the rich.”
A question of transparency
Supporters of the policy argue that selling dollars directly through banks makes the allocation of scarce foreign currency more transparent and reduces opportunities for connected intermediaries to profit.
Former communications minister Mohammad-Javad Azari-Jahromi sarcastically suggested that critics apparently preferred a system in which dollars passed through “insiders” and currency dealers without transparency over who obtained them or at what price.
Economist Sadegh al-Hosseini made a similar argument.
“Central banks everywhere manage markets by buying or selling foreign currency,” he wrote on Instagram. “The only question is: whom should the dollar be sold to—a particular exchange office, a few acquaintances and trusts, or everyone equally?”
The dispute has exposed a deeper dilemma for Iran as its foreign currency revenues shrink: whether scarce dollars should be used to defend the rial in the market, and whether doing so can have any lasting effect without addressing the sanctions, falling revenues and barriers to bringing export earnings back into the country.