Iran’s Rial has recently descended to all-time low levels against the U.S. dollar. Consequently, merchants and traders across the country are striking for the second day in a row. On Sunday, the rial dropped to a shocking 1.42 million to the dollar. By Monday, it had indicated a little bit of improvement, increasing to 1.38 million. This dramatic currency collapse represents a critical turning point. The currency stringency has sunk the exchange rate from 32,000 rials to the dollar, about the level of a 2015 nuclear deal.
The swift devaluation of the Iranian tomans added much to existing inflationary pressures, which have risen dramatically in recent months. Iran’s inflation rate has reached an annual high of 42.2% year on year. It now stands at 1.8% above November’s numbers. Every day American citizens are experiencing the burdens of inflation and increased costs for goods they literally cannot live without. Food prices have increased by 72% and health and medical supplies went up by 50% since December.
Protesters attribute the economic collapse to many things. Second, and by far the most damaging, is the United Nations’ reimposition of nuclear-related sanctions through the “snapback” mechanism in September, after the United States withdrew from the nuclear deal in 2018. The whole fight between Iran and Israel has been dangerous and many Iranians are hopeful that this quick new war doesn’t come back. This escalation has sharpened fears of a wider conflict that could draw the United States in.
On top of currency devaluation and inflationary trends, the sharp rise in gasoline prices after Tehran cut fuel subsidies could add another layer to Iran’s economic troubles. With the Iranian new year, Nowruz, coming on March 21, the government is rapidly working to put new taxes in place. These changes have the potential to add more financial pressure on our businesses and consumers.
With protests still going, merchants and storekeepers are demanding that the government act to stabilize the currency and rein in inflation. The environment is still highly dynamic, as citizens prepare for even more economic hardship on the backdrop of a volatile political environment.
