February 19, 2016
President Rohani has ordered that Iran adopt a single and unified currency exchange rate in the coming Persian calendar year.
The directive was widely expected, as Valiollah Seif, the governor of the Central Bank, has long said the dual exchange rate system would be ended soon after sanctions were lifted.
But neither Rohani nor Seif has given any hint what the new exchange rate will be or how it will be determined.
To work, economists generally say Iran will have to drop its official rate and accept the free market rate.
Iran has long had an official rate that usually differs markedly from the free market rate. At one point. All foreign exchange transactions by the government and most imports were conducted at the official rate, leaving the public to buy foreign currency on the open market for vacations abroad. In recent years, however, the Central Bank has progressively restricted the uses of the official rate so that the only official rate transactions now are supposed to be imports of food necessities, pharmaceuticals and medical equipment.
However, there is widespread concern that people with connections have been able to buy foreign exchange cheaply for their personal use.
As of Monday, the official exchange rate was 30,182 rails per dollar and the free market rate was 34,571 per dollar. That means the public must pay 15 percent more for foreign exchange on the open market.
The impact of eliminating the official rate would be to make imported medications 15 percent more expensive. Food would also be more expensive, but by less than 15 percent as most food products are produced in Iran with imports needed to fill out demand.
During the spring and summer last year, the Central Bank jacked up the official rate so the gap between the two rates was reduced significantly to the current 15 percent from about 25 percent.
