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Iran to Ease Currency Exchange Regulations Ahead of US Sanctions

© AFP 2023 / BEHROUZ MEHRIIranian Rial
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The new rules will allow exchange offices to buy and sell hard currencies, among other assets.

Iran has announced a relaxation of foreign exchange rules ahead of US sanctions targeting Iran's purchase of US dollars, trade in gold and precious metals, coal, cars and industrial-related software, according to media reports.

New US sanctions against Tehran will come into effect Monday.

The Central Bank of Iran announced Sunday that it will open currency markets, allowing exchange offices to buy and sell hard currencies for purposes such as foreign trade.

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Importers of non-essential goods will be allowed access to hard currency brought home by the nation's exporters and exchange rates will be determined by the open market, FT reports.

The influx of currency will not be limited and will not be taxed, according to FT.

The Central Bank also said it would subsidize exchange rates to allow people to buy basic commodities and pharmaceuticals.

Dollar savings accounts will now be allowed, a move expected to motivate people to bring their currency to the market, Reuters reports.

"We are in conditions similar to an economic war," Central Bank governor Abdolnaser Hemmati said on state television, cited by Reuters.

"The same day you impose sanctions we open our economy," Hemmati said, addressing the US. "We have no problems, so why should our people worry?"

"Our economic situation is very good and our foreign exchange balance is good," he added.

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Over the course of the past year, a massive gap opened between the official exchange rate of the Iranian rial to the US dollar, and rates offered on the open market. While dollar trades 1 to 44,120 rials officially, the unofficial rate fluctuates between 90,000 and 110,000 rials, FT reports. While exchange rates will be allowed to fluctuate freely, the Central Bank will provide some supervision.

"The Central Bank will try not to interfere in setting the price of hard currencies, which will be determined by supply and demand, however, the bank's supervision will prevent unbridled [market swings] and the creation of a black market," Hemmati said.

According to Reuters, seven people, including a former Foreign Exchange deputy of the Central Bank, have been detained for economic crimes.

"The foreign exchange deputy of the central bank […] who recently I heard has been deposed, has been detained," judiciary spokesman Gholamhossein Mohseni Ejei said on state-run television, reportedly referring to Ahmad Araghchi, who was alleged to have been deposed after a public outcry over the rapid fall in the national currency.

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Media reports indicate that the financial crisis has sparked a political confrontation within Tehran's government, with the President Hassan Rouhani having been summoned to the Islamic Consultative Assembly — the Iranian Parliament — to be questioned by MPs over "economic hardships."

While the move is rare and, according to the president, unconstitutional, Rouhani accepted the invitation, noting that he found the moment suitable to "disclose some realities."

The combination of financial hardship and an apparent political crisis have reportedly sparked sporadic anti-corruption demonstrations across the nation, Reuters reports.

Former Iranian President Mohammad Khatami condemned the protests on Sunday.

"The continuation of mistrust between the nation and the state will destroy hope [in the future]," he said, according to FT. "We all should hear public dissent […] and try to resolve it."

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