Iran’s central bank pumps $700mn into FX market amid rial crisis

Iran’s central bank pumps $700mn into FX market amid rial crisis
Has the rial fallen beyond the central bank's reach? / CC: Pexels, Amir Gorchiani
By bne IntelIiNews February 27, 2023

The Central Bank of Iran (CBI) has injected $700mn into the forex free market in an attempt at shifting the dollar exchange rate against the Iranian rial (IRR) from its record high, Khabar Fouri has reported.

A rollercoaster ride on the market during February 26 saw the USD/IRR pair drop an all-time low of just above 600,000/$ before settling around 550,000/$. By the end of the business day on February 27, the rate was 586,000/$, according to

An air of panic has been tangible on Tehran’s Ferdowsi street—Iran’s traditional main hub for FX trading—lately, with panicked citizens looking to save whatever remains of their assets following the latest phase in the collapse of the rial. The USD/IRR pair stood around 300,000/$ as recently as last August.

IRNA reported that the Supreme Council of Economic Coordination, chaired by President Ebrahim Raisi, met during the evening of February 26 to approve “the package proposed by the central bank and its receipt of the necessary powers to curb the currency price and maintain the value of the national currency”.

The report noted that market participants were looking to depreciate the dollar to around 500,000/$.

Earlier, Iranian economist Kamran Nadri told Donyaye Eqtesad newspaper that Iran’s double-digit annual inflation rates—such as the 18-20% rates seen before 2017 and the 40-50% rates endured in the years since 2017—were driven by one main reason, namely the government fulfilling its obligations and duties with the help of "money printing".

He added: “So, the cause of the double-digit inflation rates is not the budget deficit, but the seigniorage [profit made by a government by issuing currency, especially the difference between the face value of coins and their production costs],”.

“[Ex-US president Donald] Trump's withdrawal from the JCPOA nuclear deal [in May 2918] intensified the government's need to monetise its duties and obligations,” Nadri also noted.

The economist, also a university lecturer in Tehran, further remarked that the rial’s depreciation could not be classed as “hyper-inflationary” due to several factors differentiating it from the descent of, for instance, the Venezeulan bolivar (VES). “People quickly convert their cash into goods [in Iran], the government here doesn't have very high domestic foreign debts unlike the South American country and Iran enjoys a significant tax income unlike Venezuela.”

Nadri conceded that “if the wrong economic policies were to be enacted, we might experience a pseudo-Venezuelan inflation in 1404 [the Persian calendar year corresponding to 2025/2026].”