Imagine if monetary policy was implemented by police and militia waving truncheons. That was the state of affairs in Iran over the past week as the government tried to stop the country’s currency, the rial, from slipping into free fall. It wanted to stop currency shops from stoking the rial’s decline and to centralise currency trading in a single market. A hit to hard currency earnings as a result of western sanctions on its oil exports has added to Iran’s economic woes. Can president Mahmoud Ahmadi-Nejad hold up the Iranian economy as embargoes on its oil exports continue?
The problem with assessing the state of Iran’s economy is that accurate figures are hard to come by. Oil exports have halved since EU sanctions came into effect in July from earlier levels of about 2m barrels per day. Iran’s central bank said it had $150bn in foreign currency reserves to buffer the currency. But liquidity could be an issue. Big buyers of Iranian oil, such as China and India, pay for it using their own non-convertible currencies.
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