Iran Should Reconsider Foreign Exchange Policy
Iran would benefit from a shift to a single exchange rate.
The Iranian business community is facing an undecided Central Bank of Iran (CBI) with regard to its foreign exchange policy. The main reason for its hesitation may lie in the opaque interests connected to a multi-tiered exchange rate system.
For years, the free-market value of the Iranian rial has reflected the overall sentiment of the country’s business community as well as the current supply-demand situation. The Ahmadinejad administration kept the free-market rate stable, generating sufficient supply by injecting petrodollars into the market. However, political tensions alongside sanctions and inappropriate economic policies led to the collapse of the rial on the free market, and the rate grew to as high as 40,000 rials to the dollar in 2012.
