The devaluation of Iran’s national currency in recent months has become a major challenge at the micro and macro level of the economy and is an issue that should be pursued seriously and by the country’s officials, and for that, solutions to get out of this policy have been prepared and the way Provided for economic prosperity and sustainable growth. In this article, we try to deal with the consequences of the devaluation of the country’s currency and examine the damage to the country’s economy by continuing this process. Please be with Artan Press.
*** The two main fronts of control of economic arteries
Today’s situation of Rials is the result of politicizing the economy and directing the real price trend in the country. There are basically two literatures in the global economy for controlling economic indicators. Some economists follow Keynesian approach, arguing that the government, as a powerful player in any country’s economic system, should control the country’s economic arteries with careful policies and the leaks and injections imposed on the economic system. Observe and moderate them.
On the other hand, some economists follow the trend of classical economics in such a way that they do not allow any force to intervene and make changes in the process of economics. This view is strongly based on supply and demand, and believes that the government and no other institution should enter into economic equations, and that the climate of the economy is not something that can be improved by intervening and making momentary changes. The group believes that any interference with supply and demand will harm the economy in the long run.
During his first term in office, the Rouhani government acted in a classical manner and was able to organize the country’s economic system and bring the inflation rate to single digits. But in the second period, the government’s approach changed and by intervening in the economic system, it implemented a reform that, regardless of whether they were right or wrong, took the wheel of the economy out of the classical path.
The allocation of 4,200 tomans, for example, was the biggest miscalculation of the government, which severely created rents, and to this day, the country is involved in rents provided to institutions that misused this currency and triggered today’s currency crisis.
*** Traces of devaluation of the national currency
The issue of devaluation of the national currency is not an issue that is specific to this year and last year. Over the past thirty years, Iran has always had a significant increase in the exchange rate over eight years, but with the devaluation of the national currency, the inflation rate has always risen dramatically. Since the 1990s, Iran has witnessed many changes in the exchange rate of its national currency, one of the main reasons for which has been political disputes with major powers as well as economic sanctions imposed by the United States over the years. Since 2012, sanctions on Iran have affected the game of the Iranian economy, which to this day is the most important factor in reducing the national currency of Iran.
The Trump administration has always put pressure on the Iranian economy, leading the country’s economic outlook to insecurity, and this has led to a relative monthly decline of the dollar over the past four years compared to the previous year. It has been 20 years that this process has continued almost without interruption.
*** Reasons for the devaluation of the rial
The first reason for the devaluation of the rial against the dollar has been the significant decline in Iran’s foreign exchange reserves in recent years. One of the factors that is currently considered as the main challenge in the country’s economic system is the non-return of export dollars to the economic system. The second reason was the decrease in the exchange rate, the fall in Iranian oil prices and the decrease in oil sales by Iran. This issue has affected the Iranian economy since 2012 and has overshadowed the Iranian economy until today.
Another reason for the decline in the exchange rate has been the multiplicity of the dollar in recent years. Currently, Nimai dollar, Sanai dollar and free market dollar are traded in Iran, and usually the final price of this currency tends to the highest price. In recent days, for example, we have seen a rise in the price of the Sanai dollar, which has strongly affected the commodity exchange market and will lead to a further devaluation of the national currency.
Another issue that should not be overlooked is the severe government budget deficit in the current situation. There is no exact figure for the government’s budget deficit, but what is clear is that the government will cover a significant portion of its budget deficit in dollars, and raising the dollar will help the government pay off this debt more easily. . So in the short term it can be a good solution for the government to reduce its performance index crises by lowering the value of money.
*** Consequences of devaluation of the national currency
One of the most important causes of the devaluation of the national currency is the excessive increase of the domestic tour and the threat of the micro-economy of the society and the decrease of the purchasing power of the people, which threatens the social taboos of the society. Iran’s inflation rate is estimated at about 40 percent, which of course is higher than these figures.
*** The increasing decline of people’s living standards
The emotional atmosphere prevailing in the Iranian market these days is the result of the unbridled exchange rate, which has caused none of the basic commodities of people’s lives to have a fixed rate. For example, the 206 car produced in one year, with a certain condition and certain options and equal quality in the technical condition, have experienced a difference of 80 million Tomans in price. This endangers the economic security of the society and the price bubble will cause market turmoil and reduce supply and demand.
*** Rising gold price bubble
As the national currency depreciates, the precious metals market will also face challenges. The rising price of gold, in addition to being detrimental to the general public, is creating a similar situation for industry. Emotional atmosphere The gold market dominates because the devaluation of the national currency pushes people to parallel markets so that they can maintain part of their capital and savings. This situation has continued until the price of each coin has exceeded 16 million tomans.
On the other hand, very large industries in the country are dependent on the price of precious metals, whose market has been accompanied by a severe recession. In general, the situation of stagflation in the market requires a very deep reflection from the authorities. If we do not think about this situation in the current situation, the country’s economy may become dollarized in the future, and the costs and class differences in society will be irreparable and will have high social consequences.
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