Peyman Molavi
Graduate of the University of Sussex, England
Founder of Molavi Capital
Founder of Molavi Academy
Author of the book The Dance of Markets
The trend of devaluation of the rial in Iran, like all countries facing devaluation of their currency, is due to "inflation" which is growing exponentially.
Point-to-point inflation has reached more than 52% in the past month, and this was predictable. The reason for predictability is two important components:
The sharp growth of the Central Bank's M2 liquidity in the past few months, which has grown to more than 36%, and the sharp decline in economic growth.
Liquidity growth has always existed in Iran, but after the first round of nuclear sanctions from 2011 to today, M2 liquidity in Iran has increased 31 times, while the average economic growth has been at most 1%, which has led to stable inflation.
The sharp decline in oil revenues, along with the deep recession that has brought economic growth, makes the trend of devaluation of the rial stable and certain.
There are several reasons for the fluctuations these days, one is the lack of export dollars returning to the country, which is attributed to export trusts, and the more important reason is the decrease in oil exports. Also, the government's 2015 budget itself reflects the weakening of economic power, with 70% of oil revenues showing a decrease and 60% referring to higher tax revenues. Therefore, the devaluation of the rial is inevitable with continued rising inflation above 60%....
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The increase in the price of the dollar always affects financial markets and in the medium term, it will cause the markets to experience price jumps, and as a result, the country's liquidity will also increase, and as a result, we will witness inflation growth in the country
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The exchange rate increased to 85,000 Tomans at the end of 1403. He said that the unofficial market exchange rate should not have reached 100,000 Tomans at all. However, in a situation where the world is facing trade war and severe military conflicts, the dollar rate reached 100,000 Tomans, while considering economic indicators, it should not have reached these prices at all.
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