The currency exchange market in Iran is experiencing another volatility cycle with the Iranian rial (IRR), losing its value repetitively against foreign currency. The volatility cycles have become a frequent event in Iran’s economy, and no one finds them surprising. However, the government’s response to the increased ambiguity and volatility cycles remains the same. The Iranian authorities and policymakers always search for an individual or a group of individuals to blame for the unfolding crisis, since their adopted macroeconomic policies and monetary measures remain irreproachable. As the Iranian government refuses to learn from the past and the present episodes, it is doomed to repeat history. And ordinary Iranians pay the price.

The Iranian government is utterly reluctant to adopt a single currency exchange market; it has divided the markets and created a puzzling bureaucratic labyrinth when it comes to exchanging currency. Believing in the myth that if it controls hard currency resources and manipulates the currency exchange rate, it can restrain inflation. In other words, the Iranian government believes if it sets the exchange rate, it is controlling domestic prices. Consecutive administrations have adopted this approach for the past 40 years, and it has never lowered the inflation rate. As a result of this policy, the currency exchange market in Iran is a fractured multilayered singularity, including several submarkets offering ample opportunities for corruption. While the Iranian authorities are blaming exporters for the recent fall in the value of the rial, one has to point out that the currency exchange market in Iran favors imports and discourages exports.

At the time of writing this article, the exchange rate for the rial versus the US dollar stands at 230,940 IRR/USD in Tehran's free exchange market, according to The exchange rate in Herat, Afghanistan, is 247,200 IRR/USD, and in Sulaimaniyah, Iraq, it stands at 254,600 IRR/USD. These are not the only rates. There is NIMA, which is the abbreviation for Currency Exchange Unified System. Iranian exporters are required to sell their hard currency in this market, where the exchange rate stands at 184,450 IRR/USD, a decent 20% below the open market rate. Then there is SANA where the currency exchangers are required to register all of their trades and the exchange rate they have used. In SANA, the exchange rate stands at 228,149 IRR/USD. To all of these, one has to add the official exchange rate of 42,000 IRR/USD, at which the Central Bank of Iran (CBI) will sell hard currency to those who are importing necessities, including food, grain and medical supplies. One does not need an economist to highlight the opportunities for rent-seeking and corruption.

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