Government Media Asks Government Leaders to Intervene

Rooz Online

As various news reports about the depletion of the government’s foreign exchange reserves circulate in the media and the price of gold continues to rise in global markets, the exchanged value of the Bahar Azadi (Freedom Spring) gold coin and the US Dollar set new records in Iran’s foreign exchange markets prompting additional concerns across the political spectrum.

According to news media reports, the price of a single US Dollar rose to 2,430 Toman, the Euro to 3,130 Toman and the Azadi gold coin to 940,000 Toman last week. At one point, the jump forced shut the private exchange dealers and sellers of gold.

The sudden hike follows the unprecedented inflation that now faces Iranians, threatening many aspects of their lives.

As these market forces impose themselves on the various social and business sectors of the country, the governor of Iran’s central bank (CBI) Mahmoud Bahmani, whose recent contradictory remarks have actually added to the hype and the current crisis, once again asserted publicly that, despite the extensive sanctions facing the country, Iran has plenty of foreign exchange reserves. But he negated his claim in the Khabar Online interview in which he also pleaded with the public to deposit its foreign exchange holdings with the banks.

As reported by Khabar Online, Bahmani said, “I announce right here that people bring their Dollars and keep them in their deposits. We will provide them with foreign exchange currencies whenever they want. We will even give them the interest that the deposits will accrue and have set high rates for such deposits. There are dangers and risks when people keep these Dollars in their houses. Has it ever happened that a bank refrained from returning people’s deposits? This is not the case. We have rental boxes in banks which belong to people who can deposit their coins and Dollars there to ensure their safety. Furthermore, those people who are not part of the exchange market buy small amounts and suffer because of just a minor fluctuation in prices. These people are not professionals and they don’t know what they are doing. They speculate that the rate of their currency or coins will go up whereas what they really confront is fallen prices.” He continued, “We have paid 24 billion Dollars so that basic commodities can be imported and as a reserve. Today, our reserves are very good.”

Bahmani also repeated the usual rant about the cause of the current steep inflation to be not in the sanctions facing the country and not because of government mismanagement but because of “people’s mistakes”. By this he meant people who engage in foreign exchange translations and who buy foreign exchange as an investment to make some money when these rates go up, something that is pretty common in Iran’s exchange market. He said, “The rate of the Dollar is determined by demand and supply and the floating mechanism. This means that the rate is fluid and must be managed. Demand and supply generally determine the rate of the Dollar. Sometimes demand does not meet supply and we see this demand to be beyond real needs. In other words there is a time when foreign exchange is used to import goods or meet foreign needs but some keep it as an asset, which is a mistake by people. This increases demand for the foreign exchange beyond the actual needed amounts. In no country is foreign exchange kept as an asset. When this is done it becomes an investment commodity. Money is basically an instrument for exchange not something you store for its own sake. When it is viewed as an investment, it disrupts its natural demand and supply which unfortunately creates artificial rates.”

Other officials have expressed similar complaints. Mohammad-Reza Farzin, a member of the Credit and Money Council of the CBI recently told Iran’s ISNA student news agency, “Today foreign exchange rate fluctuations are high and prices are rising. Under these conditions it is difficult to manage the commodity market. In other words, what makes foreign exchange important is its impact on the price of goods. When we fail to manage the foreign exchange rate, the market too becomes unmanageable. Most of the problems regarding efforts to control prices are caused by fluctuations in the foreign exchange rate.”

These rationalizations about inflation and price hikes in the country are flouted by officials as conservatives critical of Ahmadinejad’s administration complain about the monetary policies of the chief executive and his cabinet. Majlis representative Ahmad Tavakoli, for example, accused the government of financial corruption with its embezzlement of 11 billion Dollars and asserted, as reported by Alef website that the CBI was ordered by the government not to provide foreign exchange to the private exchange market. He said this continued for 2 weeks.

But beyond these complaints, Fars news agency has asked, in a report, that a special emergency meeting be held among the heads of the three branches of government to look into the foreign exchange issue. “The increase of the rate of the Dollar by 700 Toman in less than four months and its further steep rise in the last two months particularly since the governor of CBI spoke about changes in the foreign exchange rate. There seems to be no serious effort by officials to address and resolve this foreign exchange issue, or at least there seems to be no comprehensive cooperation among them to solve the problem,” he said. The news agency which is closely tied to the security apparatus of the Islamic regime, proposed in its report that the issue be put on “the agenda of a meeting among the heads of the three branches of the government.”