thus further eroding the value of the rial, says Yahya ale-Eshagh, the chairman of the Tehran Chamber of Commerce.
Ale-Eshagh told the Mehr news agency, “Any family that seeks to save is going toward the dollar.”
He said the key reason was that the Ahmadi-nejad Administration, wanting to make cheap loans available to investors, ordered the interest rate charged on loans to be lowered last April. That means the payment to depositors must be pushed even lower. The result is that depositors now earn less from their savings than the rate of inflation.
That sends them into the dollar where the interest payable is higher than inflation and the value of their savings is thus preserved and even grows.
But the demand for dollars is depressing the rial. The official exchange rate has slipped in recent months from 10,500 rials per dollar to 10,800. But the free market rate for the dollar, while erratic, is generally no longer just a few dozen rials higher, but sometimes 1,000 rials or more higher.
The Central Bank resists dropping the rial to reflect the open market rate, in part because the open market rate is often suspect as subject to manipulation. The open market rate has surged and slumped with great suddenness this year, always a suspicious sign.
The inflation rate is currently just under 20 percent annually. Interest paid on long-term deposits ranges from 15 to 17 percent, making bank deposits a losing proposition.
Ali As-Saffar, an analyst at the Economist Intelligence Unit in London, told the Bloomberg news agency that Iranians generally feel safer with the dollar, even though President Ahmadi-nejad has been saying the dollar is dead currency.