In the final months of the Persian calendar year 1403 (March 2024-March 2025), Iran is witnessing an unchecked decline in the value of the rial. This persistent trend, repeated over decades, reflects the structural challenges within an economy dominated by the mulalhs’ regime. When and how this volatile surge will be contained remains uncertain.
On December 18, the state-run Eghtesad 24 news website quoted an economic expert as saying that by the end of the Persian year, the dollar’s exchange rate might soar to 880,000 rials (it currently stands at around 800,000 rial per dollar). Eghtesad 24 wrote, “Given the complex economic and political conditions, currency market fluctuations will persist in the coming days. Budget deficits, declining foreign exchange revenues, and geopolitical tensions continue to drive the rise in currency rates. Some analysts suggest that if the market regulators can manage the interbank currency market and address price ceilings, there is potential to stabilize the dollar rate. However, in a pessimistic scenario where political tensions and uncertainties persist, the dollar could even reach between 770,000 and 880,000 rials by year-end.”
Analyzing the fundamental reasons for the uncontrollable rise in the dollar’s value and the depreciation of the national currency requires examining a range of domestic and international factors that directly or indirectly impact the currency market.
Declining export revenues and shortage of foreign exchange in the market
One of the primary reasons for the rising dollar exchange rate is the depletion of foreign exchange reserves caused by declining export revenues. Iran’s economy is heavily dependent on oil and gas exports, and the regime’s insistence on pursuing aggressive foreign policies and supporting proxy forces has further restricted these resources. Additionally, reduced domestic production and the lack of diversity in non-oil export goods have placed additional pressure on foreign exchange reserves.
This shortage has resulted in decreased currency supply in the market and heightened demand for the U.S. dollar as a safe asset. This imbalance between supply and demand is a key factor driving the rise in currency rates.
Budget deficit and printing unbacked money
In recent years, the regime has faced severe budget deficits. These deficits stem from allocating oil revenues to institutions under regime Supreme Leader Ali Khamenei’s control and funding the regime’s oppressive and terrorist activities. To address this challenge, the government has resorted to printing unsupported money and borrowing from the Central Bank.
The resulting expansion of the monetary base and liquidity growth has led to intense inflation, which not only reduces people’s purchasing power but also heightens inflationary expectations. In such circumstances, demand for foreign currency as a means of preserving asset value increases, driving the dollar’s price upward.
Increased demand and speculative behavior
Seasonal factors, such as increased demand for foreign currency at the end of the calendar year and global economic events, also contribute to the rising dollar rate. During such periods, demand for imports, foreign travel, and financial settlements rises.
Additionally, speculative behavior in the currency market aimed at profiting from price volatility significantly destabilizes the situation. Reduced currency supply in the interbank market and a lack of transparency in the regime’s monetary policies exacerbate these conditions, paving the way for higher prices. It is worth noting that the government itself plays a role in exacerbating speculative activities in the currency market.
Inefficient currency policies
Government currency policies, including multiple exchange rates (official, NIMA, and free-market rates) and a lack of transparency in allocating foreign exchange resources, have created price gaps and strengthened unofficial markets. These policies have failed to curb rising currency prices and instead have facilitated corruption and misuse of resources.
Weak management of the currency market and the absence of effective oversight mechanisms have created opportunities for brokers and speculators linked to the regime to manipulate prices, intensifying market volatility.
Economist Farshad Momeni has described the “currency rate manipulation” as aggravating “corruption and crises in Iran.”
On December 23, the state-run Tabnak newspaper quoted him as saying, “When inflationary policies are pursued, all social contracts become unstable. The family institution faces a divorce crisis, and society is exposed to social anomalies, nearing a state of anomie.”
Warmongering and terrorist interventions
Warmongering and terrorist interventions in the affairs of other regional countries are another factor influencing the rising dollar rate. The consequences of these anti-Iranian policies have fueled increased demand for the U.S. dollar. Instead of explicitly addressing these destructive and belligerent actions, regime experts and media justify them with the benign term “geopolitical tensions.”
On October 3, Feedbeen financial news website reported, “As geopolitical tensions escalate, investors tend to favor safer currencies. This often leads to higher dollar rates in domestic and international markets. In Iran, an increase in the dollar rate signifies a depreciation of the rial and higher import costs… In the short term, this rise in the dollar rate may be due to investors flocking to buy foreign currencies to safeguard their assets. Additionally, concerns over the imposition of new sanctions or the intensification of existing sanctions can also be another reason for the dollar’s rise.”
Rising inflation expectations
One of the most significant factors affecting the dollar rate is “inflationary expectations”. This, too, is a byproduct of the Iranian regime’s unstable and bankrupt economy. In a climate where high inflation and a depreciating rial have become enduring realities, people and investors seek to convert their assets into foreign currencies. This trend increases demand pressure on the currency market, further driving up the dollar rate.
Solution: Reform or Revolution?
The soaring dollar rate in Iran results from a complex interplay of domestic and international factors rooted in ineffective economic policies and flawed governance structures. Declining export revenues, budget deficits, flawed currency policies, and political tensions have all combined in a chain reaction, bringing the currency market to a crisis point.
The solution to this increasingly intricate challenge does not lie in any conceivable reforms or modifications within the clerical regime’s bankrupt economy. This remedy is primarily and overwhelmingly “political” rather than “economic.” It necessitates a fundamental revolution that dismantles the current structure and replaces it with a democratic system born of the free will of the Iranian people.
