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Iran: Raisi’s Government in Real Quandary To Remove Preferential Currency Rate

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Since announcing it is going to remove the official exchange rate, Ebrahim Raisi’s government has been toing and froing to implement this decision or not. The skyrocketing prices indicate that the “hanging judge” and his government have indeed eliminated the preferential rate but are playing hide and seek to prevent public anger.

A few days after the hasty approval of removing the official exchange rate by the regime’s parliament, Bahadori Jahromi, the spokesperson of Raisi’s government, announced on March 16  that the “preferential currency is not yet eliminated,” as reported by the state-run Tejarat News.

Raisi’s flip-flop about removing or maintaining the preferential rate was mocked by state-run media and the regime’s economists.

“By removing the preferential rate, our society will lose the ability to provide medicine. Raisi told economists that he would not eliminate the official exchange rate of 4200 tomans for the dollar. Yet, he reversed himself a day after and sent a bill to eliminate the preferential rate,” Hossain Raghfar, an economist, was quoted by the state-run Did-e ban Iran on April 28.

“The prices increased daily before eliminating the official exchange rate. Now, thanks to the government which brags about helping the poor [and removing the preferential rate], prices skyrocket every hour,” Raghfar added.

He also acknowledged that Raisi is punching above his weight by talking about economics and mocked his bogus claims, such as eradicating poverty in two weeks.

“Even a teenager knows that one cannot eradicate poverty in two weeks. Raisi’s behavior cannot be excused. How can the president of a country allows himself to speak nonsense when people speak about their problems?” Raghfar asked.

Mohsen Zangeneh, a member of the Parliamentary Program and Budget Commission, also acknowledged the adverse effects of removing the preferential rate.

“We should also consider the inflation expectations. The ongoing announcements by Raisi and his ministers on removing or maintaining the preferential rate have negative effects on inflation and accelerate its increase,” he said on April 23, as quoted by the state-run Mehr News Agency, an outlet linked to the regime’s Ministry of Intelligence.

“Sometimes the government should decisively implement some policies. Delaying the implementation of decisions may disturb the community and the market and have destructive effects,” he warned about people’s backlash.

First introduced in 2018, the so-called preferential rate became the country’s official exchange rate to control the soaring prices of consumer goods.

The skyrocketing prices led to the first major Iran protests in 2018, which rattled the regime’s foundations. These protests happened shortly after the so-called “moderate” government of Hassan Rouhani fooled the world community to deliver Tehan a windfall of cash, once again confirming that sanctions do not primarily cause Iran’s economic crunch.

Hassan Rouhani and his government opted to control the fluctuating currency rate. Eshagh Jahangiri, Rouhani’s vice president, first announced the existence of 42,000 rials for a dollar exchange rate. Thus, the rate is also known as “Jahangiri’s currency.”

Lacking enough currency, the Rouhani government started printing banknotes, thus increasing the liquidity while the country’s production rested below 3%. Therefore, inflation and prices started ramping.

Besides, the official exchange rate was initially allocated for importing necessities such as medications and food items. Yet, as always, the regime’s insiders were privileged to import these goods, and they sold them sometimes threefold in the market.

“Corruption due to this currency is estimated at 5.9 quadrillion rials. It should be noted that the total development budget for 2021-2022 is about 1.4 quadrillion rials,” he added, according to the state-run Keyhan daily on November 10., 2021.

Raisi’s primary goal of removing the official exchange rate is to direct Tehran’s limited resources on regional war-mongering and terrorism and keep the regime’s oppressive apparatus on foot. But the reason that has delayed the regime’s decision to implement the new monetary policy is the social impact and fear of people’s protests.

Protests stretch across Iran by people from all walks of life, portraying the society’s volatility.  People blame the regime and its disastrous policies for the bleak economic crisis.  They cannot take more skyrocketing prices, which sends a chill to the regime’s bones.

“We should be sensitive about the rising inflation as it makes life harder for people. Inflation causes absolute poverty, breaks the back of fathers, and brings tears to the ashamed mothers’ eyes as they cannot feed their children,” the state-run Etemad daily wrote on April 30.

And the regime fears that people’s sorrow would add to their anger toward the regime would pour them into the streets as they did in November 2019, and this time would end the plague that has destroyed the country in the last 43 years.

So could Raisi continue kicking the can down the road? Or any delay could trigger more protests?

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