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In a striking reflection of Iran’s turbulent economic landscape, the value of the U.S. dollar surged to an unprecedented 75,500 tomans in early trading today, breaking historic records for the third time in a week. The pound sterling also soared to an all-time high, trading at 95,000 tomans, while the euro crossed the 79,000 toman threshold for the first time. This marks a rise of more than 4,000 tomans for the dollar in just two weeks.
Market analysts attribute these dramatic shifts to recent geopolitical developments. Following statements by the regime’s Supreme Leader Ali Khamenei emphasizing the resurgence of “resistance” in the Middle East, the dollar broke past 73,000 tomans. Shortly after former U.S. President Donald Trump hinted at the possibility of military action against Iran, the currency climbed further, surpassing 74,000 tomans.
Understanding Iran’s Multiple Exchange Rates
Iran’s complex currency system further complicates its economic challenges, with several exchange rates operating simultaneously. Among these, the dollar-e-neymaee, or NIMA dollar, plays a critical role in the regime’s financial ecosystem.
The NIMA system, introduced in 2018, was designed to address severe currency market volatility caused by U.S. sanctions and economic mismanagement. This system provides an exchange rate that is a middle ground between the official government rate and the free-market rate. The NIMA dollar primarily facilitates trade by allowing importers and exporters to conduct transactions at a rate lower than the open-market price.
#Iran: #EbrahimRaisi’s Government in Real Quandary To Remove Preferential Currency Ratehttps://t.co/iXCNM3n9vD
— NCRI-FAC (@iran_policy) April 30, 2022
While ostensibly aimed at stabilizing the currency market, the NIMA system has drawn criticism for enabling corruption and rent-seeking behavior. Government-affiliated elites and their associates have reportedly exploited the system, gaining privileged access to cheaper foreign currency while profiting from disparities between NIMA rates and the open market.
Broader Economic Implications
Despite its initial goals of moderating currency fluctuations and fostering trade, the NIMA dollar has become a double-edged sword. Its preferential rates attract traders seeking to lower import costs, but they also serve as a conduit for systemic corruption. For instance, well-connected individuals have allegedly secured NIMA dollars under the guise of importing essential goods, only to sell the products—or even the currency itself—at higher market rates.
This multifaceted currency system illustrates the challenges Iran faces in managing its economy amid sanctions, mismanagement, and regional instability. With some analysts predicting the dollar could exceed 100,000 tomans by year-end, the question remains whether the government can address the root causes of volatility or if deeper reforms are needed to stabilize Iran’s economy.
The current economic turmoil, compounded by external pressures and internal mismanagement, underscores the vulnerability of Iran’s financial system. Without substantive changes, the growing disparity between official and free-market rates risks exacerbating inequality and deepening the public’s mistrust of economic institutions.
#Iran’s Financial Crisis Is “Fire Under the Ashes” https://t.co/kmkgEGfeck
— NCRI-FAC (@iran_policy) June 2, 2023
The Preferential Exchange Rate: A Legacy of Corruption and Mismanagement
In 2018, under former regime president Hassan Rouhani, the clerical regime introduced the preferential exchange rate of 4,200 tomans per dollar, known as “Jahangiri’s currency,” to control the skyrocketing costs of essential goods such as food and medicine. However, the policy quickly became a vehicle for widespread corruption. Regime-affiliated elites exploited the subsidized rate to import luxury goods and resell them at inflated prices, leaving ordinary Iranians struggling with higher costs. By 2019, misuse of this rate had cost the economy approximately 5.1 quadrillion rials, according to reports.
The issue came to a head in early 2022 when Ebrahim Raisi’s government sought to eliminate the preferential rate as part of its budget plan. Despite months of deliberation and warnings from officials, the regime’s parliament hastily approved the decision on March 6, completing the process in just two minutes. This abrupt move triggered immediate price hikes, impacting over 600 essential items and compounding the financial burden on the population.
The preferential exchange rate, originally designed to ease economic pressures, became a glaring symbol of systemic corruption and mismanagement. Its removal under Raisi’s administration, though necessary, highlighted the regime’s inability to manage economic reform without exacerbating public suffering and fueling social unrest.
