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Iran: Raisi Adamant on Removing Official Exchange Rate, MPs Warn of Consequences

It has been two weeks since the Iranian regime’s president Ebrahim Raisi introduced his government’s budget plan. While the regime’s parliament hastily approved the budget’s generalities, MPs continue warning Raisi about the consequences of removing the official exchange rate.

Despite numerous warnings by regime officials, economists, and state media about the “devastating” consequences of removing the official exchange rate, Raisi, and his government are digging holes to proceed with their plan.

“Yesterday, the spokesman of the Budget Consolidation Commission said that eliminating the official exchange rate has serious consequences for the people,” the state-run Sharq daily wrote on January 18.

The MPs’ shedding crocodile tears for people reflect their anxiety about a popular backlash.

According to Sharq, the parliament’s Security Commission Chair Mojtaba Zoulnori acknowledged that Iran’s “society cannot endure the economic consequences of eliminating the official exchange rate. The skyrocketing prices have broken people’s back.” “The current situation is not suitable for removing the official exchange rate,” Kazem Delkhosh, member of the Budget Consolidation Commission told the state-run Khabar Online website on January 18.

“The government’s plans should not impose more pressure on the People. Those decisions may solve the government’s problem, but seriously damage people’s livelihood,” Delkhosh said. “Removing the official exchange rate will increase the prices of at least 25 consumer goods, affecting the prices of 600 to 700 items, exerting crushing financial hardship on the people,” he was quoted as saying.

Sharq daily also quoted a letter by former MP Ahmad Tavakoli to Raisi and to other heads of branches about the consequences of removing the official exchange rate. “Ignoring expected inflation causes severe damage. The most bitter result of this crisis, in addition to inflation, is a terrible recession that multiplies people’s financial crunch,” Tavakoli cautioned.

Tavakoli had also told Sharq daily that “inflation has crushed people and it would be worse [if Raisi removes the official exchange rate]. People are losing their patience.”

Background

The official exchange rate of 42,000 rials for a dollar was introduced in 2018 by the Hassan Rouhani government, supposedly to control prices of basic consumer goods. Since the currency based on the official exchange rate was allocated to the regime’s front companies, using it did not effectively reduce the prices of basic goods. It rather allowed regime officials and their relatives to embezzle billions of dollars and sell the basic goods at a much higher price in the open market.

Since the regime did not have enough resources, it started printing banknotes, therefore increasing liquidity. As Iran’s production rate is very low due to the regime’s corruption, ineptitude, and mismanagement, the liquidity grew rapidly increased inflation, causing skyrocketing prices.

 During the last year of his term, Rouhani intended to eliminate the official exchange rate, estimating it would earn them at least 600 trillion rials. Now, if Raisi suspends or removes the official exchange rate, his government would earn around $2 billion, with the current exchange at a free market rate of 280,000 rials for $1.

Since the regime desperately needs cash to support its terrorist proxy groups, even $2 billion is essential for it. Removing the official exchange rate will heighten public rage and increase the possibility of another major uprising, making the blood of regime officials run cold.

To know more about the origins of the official exchange rate and its consequences, read our reports:

Economic Consequences of Eliminating the Official Exchange Rate in Iran

Editorial – Iran: Removing Official Exchange Rate Is Playing With Fire