Perhaps They Need a Tax Cut!Iran’s Currency Crisis: Bad News For Mahmoud Ahmadinejad
As the rial plummets in value and vendors desperately hoard dollars, president Mahmoud Ahmadinejad faces a harsh backlash from his political allies, including the feared Revolutionary Guards.
Iran’s economy is in shock. Over the past week, the country’s currency, the rial, has lost half its value, and nobody knows whether the government can stop the downward spiral anytime soon. On Wednesday, Tehran’s traditional bazaar shut down, and authorities from the police and the Revolutionary Guard (IRGC) arrested a group of merchants and businessmen who had gathered in the marketplace. An eyewitness told The Daily Beast that near Ferdowsi Square, where most of Tehran’s foreign exchange shops operate, anti-riot police had established a widespread presence and that Tehran’s commercial area had assumed the appearance of a military zone.
Analysts inside and outside Iran are debating whether the government’s economic policies are to fault for the currency crisis, or whether it’s a sign that the U.S.’s crippling sanctions are finally starting to be felt on the ground. But almost all agree that the rial’s depreciation spells very bad news for the country’s embattled president Mahmoud Ahmadinejad.
On Sept. 4, Ahmadinejad had dismissed speculation that the country’s currency was in deep trouble. When asked whether the rial would reach an exchange rate of 30,000 to the dollar, the president called such predictions “psychological warfare.” Now, just four weeks later, the rate has jumped to 35,000 rials to the dollar, and a Tehrani business owner reports that the exchange market has nearly shut down, with no one willing to sell off dollars for the quickly depreciating rials.( Collapse )