Iranian MPs call for rapid intervention to halt currency turmoil

Reuters, Tuesday 11 Sep 2012

Legislators urge central bank to support the rial as finance minister says turmoil will be resolved in three days

A group of Iranian legislators, critical of the policies of President Mahmoud Ahmadinejad, has urged the central bank to intervene in the currency market to support the rial, which hit record lows this week, Iranian media reported on Tuesday.

Iran's economy and finance minister, meanwhile was quoted as saying that the country had sufficient foreign exchange reserves and the market turmoil would be resolved "within three days."
The Iranian currency hit an all-time low on the open market on Monday at 25,650 to the dollar, half its value of a year ago and after losing about 17 per cent since last Thursday. It was more stable on Tuesday.
While the direct cause of the sharp fall is unclear, analysts say it is a further sign that sanctions imposed over Iran's disputed nuclear programme are biting deeply into
its economy and also reflects confusion over the government's currency policy.
The rial's slide threatens to push up inflation and fuel capital flight from Iran and has inflamed political divisions within the country, with foes of President Ahmadinejad in the legislature accusing his administration of foot-dragging and exacerbating the situation.
A group of a few senior lawmakers heaped criticism on the central bank and its governor Mahmoud Bahmani for failing to stabilise the currency during a closed meeting in parliament on Tuesday, the Mehr news agency reported.
"Most of the discussions of representatives was for the government to enter the exchange market as quickly as possible and inject currency," said Gholamreza Taj-Gardoun, the deputy of the parliament's planning and budget committee, according to the Iranian Students' News Agency (ISNA).
"So far the central bank has not intervened and this has created turmoil," he added.
On Monday, the committee chairman, Gholamreza Mesbahi-Moghaddam, accused the central bank of cutting off the supply of dollars to Iranian traders three weeks ago, describing it as "the biggest mistake in history."
Mesbahi-Moghaddam's allegations raised doubts about whether Iran has enough hard currency stores to weather Western sanctions aimed at forcing the Islamic republic to give up its nuclear programme.
In another closed meeting in parliament on Tuesday, Economy and Finance Minister Shamseddin Hosseini, was quoted by lawmakers as saying the market was not short of funds and that the turmoil would be resolved "within three days."
"In this meeting, the economy minister gave a good report and said there was no lack in the country's foreign exchange reserves. It is only a rumour ... that the government does not have sufficient reserves," the semi-official Fars news agency quoted lawmaker Ezatollah Yousefian as saying.
"The economy minister also promised that in the next two or three days, some positive measures will be taken to resolve the turmoil," he added.
At the end of last year Iran had $106 billion of official foreign reserves, enough to cover an ample 13 months of imports of goods and services in normal times, according to the International Monetary Fund.
However, the reserves may have started falling as the sanctions have cut oil exports.
The rial trades at two rates in Iran: a "reference" rate of 12,260 to the dollar maintained by the central bank and available only for the import of essential items, and the far weaker rate determined by a street market made up of small money changers, in which most Iranians can obtain hard currency.
The government is seeking ways to shore up the faltering currency and unify its open market rate with the official rate.
Last month Bahmani suggested he would change the official reference rate "within 10 days", news that sent the rial's unofficial price tumbling 5 per cent.
In an apparent change of policy, officials from the Ministry of Economics have since proposed a currency exchange open to major traders, which they say would increase transparency and stability.
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