As Iran gets closer to Persian New Year’s Day (March 21), the great numbers of people wanting to travel abroad for the holidays are becoming increasingly anxious about the apparent evaporation of much of the country’s dollar supply. Iranians are finding they have to queue from before dawn for foreign currency being doled out by authorised money exchanges.

In a bid to stop a repeat of January’s run on the Iranian rial (IRR), the Central Bank of Iran (CBI) and police clamped down against currency speculators, arresting dozens and seizing some $4bn from private accounts. Subsequently, as part of a new plan to regulate the forex market, the CBI then designated several official dealers to sell the dollar at a fixed rate of IRR44,600 (it had reached near an unprecedented IRR50,000 on the informal market prior to the swoop on money changers), causing diabolical queues and, ironically, a mushrooming of speculators embedded in the frustrated lines.

The push to regulate Iran’s wild foreign currency market has met with criticism from several quarters in Tehran, given that only two weeks remain before the country shuts down for its annual Nowruz holiday celebrations, starting March 19.

Some jitters may have been quelled by the official action that stopped the rapid depreciation of the IRR dead in its tracks, but the snapback of speculators lining up to buy officially issued dollars has not gone down well. Mizan News Agency reported that by limiting the supply of dollars, officials have enticed thousands of people looking to make quick money to join the queues to bag what US currency they can.

Inadvertently bloating hard currencies
While pondering the people snaking around Ferdowsi Square in the capital, one currency trader remarked: “Look, what is now effectively happening is that the central bank has made the situation even worse as this adds extra pressure on other currencies like the euro and pound sterling.”

Trading the dollar and euro had become a “fun pastime” in recent months, with even store clerks throwing whatever savings they had into buying hard currency, he added. “I don’t know about you, but there is a good premium now if you have euros or pounds to sell because of the lack of dollars floating around,” the trader said.

By lunchtime on March 5, queues were still forming around the central trading area of the Iranian capital, with police hovering to put to a stop to any fights that might break out between frustrated traders.

The new regulation on buying foreign currency states that each buyer must presently register their national ID card with an authorised exchange and present a valid visa and booked ticket for travel abroad to be able to purchase a maximum $2,000.

Mohammad Reza Najafi Manesh, a member of the Chamber of Commerce in Tehran, suggested in an interview with Entekhab website that the evolved reluctance of the currency traders to sell dollars and euros—a phenomenon that hardened before the raids—as well as rising dollar-sale prices in real transactions were caused by what he referred to as disturbances on the foreign exchange market. The rate fluctuations were “due to excitement”, he said, “otherwise, we would have priced the dollar at IRR44,500 in the chamber of commerce”. If the government could meet the required dollar demand, the market would return to equilibrium, he said.

Najafi Manesh added that the government should provide the foreign currency needed for industrial production through banks and money exchanges, while, as it has done in the past, issue currency for travellers through agencies at the airport.

The real rial rate
Meanwhile, as people all around became bored pouring time down the drain awaiting foreign currency, another trader commented that nobody knows what the dollar is truly trading at any longer due to the CBI and police market intervention. “I cannot even tell you what the dollar rate is currently, as each unofficial bureau is trading it at whatever price they like… the actual rate could be as high as IRR48,000, who knows!” he said.

Don’t expect this confused situation to be untangled any time soon. As a growing number of people’s travel dates come nearer, more and more folk will be forced to head to the authorised secondary market sellers. At the same time, of course, the tertiary market traders selling unofficially will demand a premium from those who can’t bear to join the queue.