ZCZC
BCN-34
IRAN-ECONOMY-CURRENCY,FOCUS
Iran’s currency crisis triggers corruption crackdown
TEHRAN, Aug 1, 2018 (BSS/AFP) – With its currency plummeting ahead of the
reimposition of US sanctions, Iran has responded with dozens of arrests and
claims of an enemy conspiracy, but also signs of a push to confront
corruption.
The Iranian rial has lost almost two-thirds of its value since the start
of the year, and 20 percent in just two days since the weekend, hitting a
record-low of 119,000 to the dollar.
Many lay the blame on the imminent reimposition of US sanctions on August
6 following US President Donald Trump’s decision to pull out of the historic
nuclear accord, with Iranians rushing to store their savings in dollars.
The central bank issued a statement on Monday that trod a familiar line,
blaming “the enemies’ conspiracies” for the rial’s sudden decline.
This may not be purely paranoid fantasy. The US and its Gulf Arab allies
are engaged in a “maximum pressure campaign” against the Iranian government,
and there have been rumours that the United Arab Emirates has been curbing
the physical supply of dollars to Iran, helping drive up prices.
But others say outside pressure is only effective because Iran’s economy
is so corrupt and poorly managed.
Belatedly, the authorities appear to be waking up to the crisis. This
weekend, the judiciary announced 60 people had been arrested for fraud and
trying to undermine the banking system, with more to come.
Spokesman Gholam Hossein Mohseni-Ejeie said several had direct ties to the
government, allowing them, for example, to illegally import luxury cars, and
could face the death penalty on Iran’s infamous charge of “corruption on
Earth”.
– New transparency –
The arrests follow mounting anger against profiteers who use political
connections to access dollars at artificially low rates, and then use them to
import goods on the cheap, or simply sell them on the black market for a huge
profit.
In a radical departure from usual government practice, in June the young
telecoms minister Mohammad Javad Azari Jahromi exposed a group of mobile
phone importers who were gaming the system.
They had been granted $250 million at the cheap rate to import phones, he
said, “but less than one third was used for the purpose,” implying the rest
was stashed away or sold.
The 36-year-old minister’s move proved wildly popular on social media, but
saw a backlash from some of his cabinet colleagues such as Industry Minister
Mohammad Shariatmadari, who said doing something similar in his ministry
would amount to “a war against the private sector”.
Still, the episode showed a new willingness among Iranian officials to “be
transparent and introduce accountability into the system,” said Esfandyar
Batmanghelidj, founder of the Europe-Iran Forum, a business network.
“Hopefully, more officials will understand that this is what the public is
looking for.”
– ‘Full-fledged crisis’ –
The other priority is fixing the chaotic policies that have facilitated
profiteering in the first place, particularly the disastrous decision in
April to set a single, fixed rate for the dollar at 42,000 rials.
To enforce the decision, the authorities shut down currency trading shops
and made it illegal to sell dollars above the official rate, which only
fuelled a boom in the black market.
The government was forced to climb down in June, saying only importers of
essential items such as medicines would use the cheap rate, while others
would negotiate a higher price.
President Hassan Rouhani sacked the central bank chief last week, and his
replacement, Abdolnassar Hemati, has promised new currency policies “in the
coming days”.
But trapped in fire-fighting mode and under fire from both conservatives
and reformists over the deteriorating economic situation, Rouhani has done
little to address deeper problems.
“We’re in a full-fledged crisis and that’s taking all the attention. No
one is talking about bank reform and investment and job creation,” said
economic journalist Maziar Motamedi of Tehran’s Financial Tribune.
Fearing a public panic, the government continues to insist that everything
is under control, but has so far offered only vague promises that it will
allocate more money to job creation and funnel more infrastructure projects
to the private sector.
“Just saying positive stuff is not helping. People have a hard time
believing them,” Motamedi said.
“Everyone knows the structural problems are there but the government is
tackling crises as they happen rather than preventing them.”
BSS/AFP/HR/1050