Annual losses of Iranian rial reach 102% due to UN sanctions
The Iranian rial has witnessed an unprecedented collapse over the past months, and today, Sunday, it reached its lowest levels against the dollar, recording about 1.12 million riyals on the unofficial black market by 07:30 GMT, based on the websites of Bonbast andAlan Chand, specialists in currency tracking.
A year ago, the dollar was trading at an average of about 555 thousand riyals, which means that the riyal lost about 102% of its value in 12 months. A few days ago, before the activation of the latest UN sanctions, the dollar was revolving around one million riyals, which clearly shows the great acceleration in the currency's loss of value with the re-imposition of restrictions on Iran.
Return of Snappack and Market pressures
The re-imposition of UN sanctions through the Snap-Pack mechanism restored restrictions on oil exports and bank transfers, which limited the flow of hard currency to banks and the treasury, and reflected a direct impact on market confidence. As a result, demand for the dollar has risen at a record speed, while citizens have resorted to buying gold as a safe haven to protect their savings from collapse.
The parallel market has shown the difference between the official and parallel rate blatantly, while the central bank offers subsidized rates, the black market shows the real value of the currency, which increases speculative activity and smuggling.
Inflation and living repercussions… and central bank actions
The deterioration of the riyal immediately reflected on the domestic prices of basic materials, food and medicines, considering that every jump in the price of the dollar doubles the cost of import, which exacerbates inflationary pressures, at a time when analysts warn that the continuation of this decline may lead to an annual inflation wave that exceeds what Iran has witnessed during the past years, and increases the burden on the middle and poor classes.
Faced with the crash, the central bank has launched unconventional financial instruments, such as gold-backed bonds and pre-sale foreign currency contracts, in a bid to dominate the market and absorb speculative demand for the dollar. But experts point out that these measures remain temporary palliatives, as they do not address the roots of the crisis, represented by the scarcity of hard currencies and international banking isolation.
Analysts also believe that the path of the Iranian rial is linked to the political path more than any internal economic factor. Continued UN pressure means further deterioration, possibly reaching levels above 1.2 million riyals to the dollar, while any partial settlement or easing of sanctions may provide an opportunity for limited stability.
The currency's deterioration has increased living and social pressures, as purchasing power is declining rapidly, and citizens are having difficulty securing their basic needs.