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Iran: Hastily Approval of Removing Official Exchange Rate and Its Consequences 

File Photo: A scene of the Iranian regime’s so-called parliament

After months of the flip-flop, the Iranian regime’s parliament hastily approved eliminating the official exchange rate of 42,000 rials for a dollar as a part of Ebrahim Raisi’s budget plan for 2022-2023. The move came following endless debates and different warnings by regime officials about the consequences of this decision, such a measure was wrapped up in less than 2two minutes! 

“The parliament got tired after 15 days of reviewing the plan to eliminate the official exchange rate, and you exploited this situation to approve the removal of the official exchange rate in two minutes. The people’s ever-shrinking tables would demonstrate the impact of this decision. At the same time, the government will not fulfill its obligations,” Alireza Pak Fetrat, MP from Shiraz, said on March 6, according to the state-run ISNA News Agency 

In response, Mohammad Bagher Ghalibaf, the parliament speaker, acknowledged that it has beenthe Majlis [parliament] had been assessing this plan for three months that Majlis [parliament] been assessing this plan.”  

According to the semi-official ISNA News Agency on March 6, the regime’s parliament has authorized Ebrahim Raisi’s government “to remove the official exchange rate on the condition to that it will provide the necessary resources for compensating the difference for the import of basic goods, medicine, and medical equipment.”  

Hossain Noshabadi, a member of the Majlis National Security Commission, claimed on March 6 that Raisi’s government would allocate 250,000 trillion rials in the form of electronic coupons, or $9 billion based on the current exchange rate to help people and control another currency shock.  

While rejecting this claim, Alireza Beigi, regime’s MP from Tabriz, told the state-run Setar-e Sobh daily that “Regarding the electronic coupon, I must say that we have not yet incurred the costs and the government has not decided in this regard.” 

“The sudden removal of the official exchange rate is harmful and could result in many problems for people. Many of the essential goods are imported using this rate. Suppose the government suddenly removes or suspends the official rate. In that case, people will have a problem making a living,” Mohammad Reza Rezaei Kochi, Chairman of the Civil Commission of the Parliament, told the state-run Mehr news agency on March 7.  

The official exchange rate was introduced in 2018 by Hassan Rouhani’s government 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.”  

The so-called “Preferred currency” was supposed to be used to import the country’s essential materials, most notably food items and medicine. Many economic experts considered this as unofficial subsidies intended to control the prices of essential goods. Yet, the regime’s insiders used the official rate to import luxury goods that ordinary Iranians could not afford.   

Since the Rouhani government did not have enough currency, it started banknote printing, thus increasing liquidity. The rising liquidity was in line with Iran’s low production rate of 3%, so inflation soared, and prices skyrocketed.  

“In 2019 alone, around $15 billion [based on the official exchange rate] was spent on importing various items,” wrote Fars News Agency on November 7, 2021. “Besides all this fuss, Rouhani’s government was virtually incapable of controlling prices. Surveys show that based on the free-market exchange rate in that year, the importers embezzled around 5.1 quadrillion rials.” 

According to Professor Hamed Najafi Alamdarlo of Tarbiat Modares University, “Estimates show that from 2018 to September 2021, about $46 billion in foreign exchange resources has been allocated to [importers]” to preserve the official exchange rate of 42,000 rials for $1.   

“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 intends to remove the official exchange rate, so he can direct the regime’s limited resources to the export of terrorism, fueling proxy wars and keeping the regime’s oppressive apparatus on foot.  

Yet, removing the official exchange would further increase the prices of essential goods, such as food items and medicine. The Iranian Resistance has produced an in-depth report about this issue that could be found here 

Raisi was adamant about removing the official exchange rate, yet his decision has caused much stir in the regime. “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,” Kazem Delkhosh, member of the Budget Consolidation Commission, told the state-run Khabar Online website on January 18.  

On February 2, Radio Farda revealed a secret document of a so-called “Working group meeting to prevent security crises due to basic livelihood problems.”  

At the meeting, which IRGC security officials attended, Col. Payam Kaviani from the NAJA intelligence and public security police warned that “If we do not manage the elimination of official exchange rate and another wave of skyrocketing prices, it will result in more than just an economic crisis.”  

Alireza Beigi publicly repeated this warning in his interview with Setar-e Sobh newspaper on March 6. “Eliminating the official exchange rate will have dangerous consequences. We should be careful that other protests, like the ones in 2019, do not repeat do the skyrocketing prices.”  

In other words, Raisi has sowed the wind and shall reap the whirlwind of another uprising.