A rial catastrophe

Take budget deficits, add Western sanctions, stir briskly, and watch for the currency to fall:

In a sign of the multi-layered theories swirling in Iran, some economists and experts have accused the government of trying to devalue its currency in order to meet its own budget deficit.

The government earns more than 90 percent of Iran’s overall foreign exchange revenues as a result of oil sales. Higher dollar rates bring more rials into the treasury to pay salaries and fund state programs, such as guarantee stipends to compensate for the withdrawal of fuel and food subsidies last year.

[Shamseddin] Hosseini, the economy minister, challenged the government’s critics to provide more than just claims. “We are not after devaluating rial,” the semi-official Fars news agency quoted Hosseini as saying. “Those who make such claims better offer evidence.”

Devaluing a currency to pay government debts? Whoever heard of such a thing? And does this curve look familiar?

Just incidentally, last week a US dollar bought 24,000 rials. This week it fetches 35,000. The smallest banknote is the 100-rial note, though Wikipedia notes, presumably unironically: “The 100, 200 and 500 rial banknotes are becoming increasingly uncommon; shopkeepers habitually give out small packages of gum in lieu of the last 500 rials of change.”

(Via Bayou Renaissance Man.)


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