Reuters Report on Iranians Growing ‘Poorer by the Day’

Reuters news agency, in a field report published on Tuesday, July 8, examined the impact of the national currency collapse crisis on the economic situation of Iranians in Iran. We read this report below:

“Maryam Hosseini, a retired elderly Iranian teacher, made one last effort to pay her daughter’s university tuition abroad by withdrawing all her savings from the bank and buying dollars with it.

But that was not enough. Her daughter, who had three years left in her university studies, was forced to abandon her future plans and return to Iran.

The story of the Hosseini family running out of money is a daily story for many Iranian families who have exhausted their savings to support their children and send them dollars.

Ms. Hosseini says: My daughter is forced to bury her dream of studying abroad and return. I can no longer afford the expenses.

The reason for Ms. Hosseini’s lack of funds is the severe collapse of the Iranian rial’s value to its lowest rate against the US dollar.

This currency collapse has not only made life in Iran much more expensive, but has also made it very difficult to keep the country’s economy afloat amid a hurricane of paralyzing US sanctions and the new coronavirus.”

Drawing from Reserves, How Long?

Reuters notes that each dollar in Iran has historically exceeded 20,000 tomans, and since then has been creeping up further.

The news agency continues:

“The collapse of the Iranian rial’s value in recent weeks forced the Central Bank to inject hundreds of millions of dollars into the market to stabilize the rial.

Abdolnasser Hemmati, Governor of the Central Bank of Iran, has described this intervention as ‘reasonable and purposeful’.

Mr. Hemmati says the Central Bank has sufficient foreign reserves but has not indicated the extent of these reserves.

Economists also say that to deal with the budget deficit resulting from the economic crisis, Iran will have to draw from those reserves, but this in turn weakens Iran’s ability to control inflation.

Garbis Iradian, senior economist at the Institute of International Finance, says Iran’s foreign reserves are limited for injecting into the market and even with this, it will not be able to control the depreciation of the country’s currency, especially given US sanctions and Iran’s isolation in the global community.”

Reuters continues that “since the United States withdrew from the nuclear deal with Iran, Iran’s currency has lost 70 percent of its value.

The Iranian government has considered several different exchange rates to compensate for this situation, particularly to reduce financial pressure on importers.

But in the free market, even after the latest interventions by the Central Bank, the rial has continued its decline.

One of the latest reasons for the depreciation of the toman is the tension between the Islamic Republic and the International Atomic Energy Agency over the issue of allowing inspections of two suspect Iranian nuclear sites. Another reason is also due to the economic damage caused by the coronavirus.”

A Deeper Transformation?

Reuters writes that these successive currency collapses could be indicative of a deeper transformation.

The news agency continues:

“Nils DeKoch, an economist at Atradius, a commercial credit insurance company, says that a more fundamental factor in Iran’s economy is the shift from the traditional pattern of surplus reserves to budget deficit in 2020, which resulted from a sharp decline in oil revenues.

He says it is estimated that Iran’s Central Bank still has sufficient reserves to support the rial, but as it continues to help cover budget deficits, these reserves are also being depleted.

Iran, which in April 2018 was still exporting more than 2.5 million barrels per day of oil, can now export approximately between 100,000 and 200,000 barrels per day less due to US sanctions.

The International Monetary Fund estimates that Iran will draw approximately 20 billion dollars from its financial reserves this year and another 16 billion dollars next year.”

Growing Poorer by the Day

Reuters writes: “It is estimated that the Iranian government’s budget deficit by March 2021 will reach 10 billion dollars. This is an estimate announced by Masoud Khansari, the head of Tehran’s Chamber of Commerce, in interviews with media.

He added that the increase in budget deficit and monetary expansion will increase inflation, lower the value of the rial, and reduce people’s purchasing power.

According to a merchant in Tehran named Sarosh, who did not want his last name revealed, the Iranian government has asked people not to flee the toman and not to buy foreign currency, and many money changers in the city center are also refraining from selling dollars to customers.

He explained that when the dollar price rose relative to the toman, people rushed to money changers to buy dollars, but now the situation is calmer.”

Reuters adds that “now in Iran, the number of those who are safe from economic hardship has diminished. From business elites to ordinary workers, everyone now feels the impact of the currency collapse.

With increased taxes, reduced subsidies, limited access to foreign markets due to sanctions, and difficulty obtaining the currency necessary for trade, more and more businesses report encountering numerous problems every day.

The owner of one of Rasht’s furniture workshops in northern Iran says that the currency crisis and trade sanctions have paralyzed us. We now have shortages in raw materials as well.

The prices of essential goods such as bread, meat, and rice are increasing every day. Meat at 10 dollars per kilogram is now unaffordable for many others. Media constantly report on worker layoffs or strikes by workers who have not received their salaries for months, including in state-owned factories.

Reza Mahmoodzadeh, a government employee, says: Life has become very expensive and salaries no longer suffice. We are becoming poorer every day.

With the International Monetary Fund’s estimate of Iran’s inflation, which is a 34.2 percent inflation forecast for the current year, most Iranians should prepare themselves for even higher price increases.

Meanwhile, Iran’s religious leaders intend to prevent a resurgence of unrest similar to the November 2019 uprising; unrest that began due to economic hardship but took on a political character, during which protesters demanded the removal of senior government officials.”

Source: Radio Farda