One of the most serious economic challenges faced by the Iranian authorities is how to manage the value of the national currency, the rial, amid a host of negative factors such as high inflation, low growth, and capital flight. For years, officials have blamed currency devaluation on high inflation and vice versa without understanding the root cause of the multiple crises at hand: namely that Iran’s economy is severely ill. It is an economy that is expending more than it can generate in economic values. The consequence is that the only short-term balancing act will be exchange rate adjustment and devaluation.
In this sense, the Ebrahim Raisi administration’s decision to adopt the new Five-Year Development Plan to address imbalances in the economy should be good news—if implemented efficiently.
The central bank’s game plan
To address the exchange rate issue, the Central Bank of Iran (CBI) has once again introduced a currency stabilization plan.
On June 13, during a presentation to financial sector representatives, CBI Governor Mohammad Reza Farzin outlined the key components of the plan, stating that the authorities envisage the return of a...
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