FarsiNet News - News related to Iran, Iranians and Persians - February 1999: "Iran rial recovers, but economic worries remain
By Firouz Sedarat
TEHRAN, (Reuters) - The Iranian rial has recovered somewhat after recent plunges against hard currencies, but traders and economists remain concerned about the economic impact of the currency's fall.
On Tehran's illegal but active black market, dealers on Thursday were trading the rial at 8,100 to the dollar compared to about 8,700 rials per dollar three days ago. Traders said the rial improved after police rounded up dozens of street dealers since Tuesday. The currency is still 11 percent lower against the dollar compared to two weeks ago.
``I think currency speculators are betting on Iran running seriously out of hard currencies, with a view to the recently approved budget and its debates,'' said economist Fariborz Raisdana, referring to the heated parliament debates which exposed Iran's fragile financial situation. Many deputies expressed skepticism about forecast state revenues being realised due to low oil prices and predicted that the government would face another debilitating budget deficit like this year's shortfall of $6 billion.
The heavy deficit has forced the government to seek $3 billion in new loans from foreign creditors and to slash hard currency expenditures at home, forcing many state-run firms to turn to the black market for their hard cash needs.
Economists say fears of a possible flurry of price rises in the new year which starts on March 21, when fuel prices will be increased by up to 75 percent, had also prompted many ordinary Iranians to buy hard currencies as a hedge against inflation.
``Economically the concern is that the private sector seems to be sinking its liquidity into the black foreign exchange market again, instead of other relativlely more productive ventures, such as construction,'' Raisdana said.
Iran has had strict foreign exchange controls since 1995, when the government imposed an official rate of 3,000 rials to the dollar and banned free-market currency exchange.
The rules, adopted to halt a plunge of the rial and a capital flight after the United States announced sanctions against Iran, led to years of relative stability of the currency after police arrested scores of black market dealers. But the rial has lost 40 percent of its value against the dollar since early last year as a slump in oil prices hit the economy. Iran, the world's third largest oil exporter, depends on oil for about 80 percent of its hard currency income.
Khosrow Sobhe of the Iranian Carpet Exporters Association said the rial's frequent fluctuations were hurting exports. ``There is a daily confusion on prices among dealers because of the rial's fluctuations, and that does not help the prestige of Persian carpets,'' said Sobhe about the rugs which are Iran's second biggest hard cash earner after oil.
Sobhe said dealers were finding exports less profitable because of the large difference between the black market rate and the official rate of about 5,700 rials per dollar at which they are required by law to sell their hard currency earnings."
No comments:
Post a Comment