Central Bank of Iran (CBI) says availability of hard currency for businesses has increased by $10 billion in the past 11 months, compared to the previous year.
A spokesman of the bank said on Tuesday that as the Iranian year 1400 is coming to a close, the government was able to make $26.3 billion available to businesses compared with $16 billion dollars in the previous year.
US sanctions since 2018 slashed Iran’s oil and non-oil exports depriving the government of much-needed hard currency for imports. Former president Donald Trump withdrew from the Obama-era nuclear deal and imposed heavy oil export and banking sanctions on Tehran.
Oil exports dropped from more than two million barrels per day to around 200,000 by 2019. However, around the time of US elections in November 2020, Iran’s oil exports began to pick up using illicit ways of shipping mainly to China. Throughout 2021 and early 2022, daily exports were close to one million barrels.
The CBI official did not specifically mention the contribution of oil revenues to the increase in foreign currency circulation, but in the past weeks many officials have boasted of higher oil sales.
The Biden Administration has avoided effective enforcement Trump’s sanctions, with the hope of reaching a nuclear agreement with Iran. The result has been a relative improvement in the finances of the Islamic Republic and perhaps less leverage for Washington.
Another sign of more dollars entering the Tehran currency exchange market is the rise in the value of the rial. The Iranian currency had dropped to 305,000 to the dollar in December, but on Monday it was trading at 255,000, a considerable gain given the other discouraging economic indicators.
One reason for rial’s rising value has been optimism regarding nuclear talks with the United States that would lift oil sanctions, but another factor is simply more dollars flowing back into government-controlled exchange market.
The increase in foreign currency income, however, is not sufficient to address the multiple crisis the government faces. First among them is the need to increase salaries of millions of people employed directly and indirectly by the government. Average salaries are now one-third of the minimum needed to manage bare necessities. Unions say that a worker needs $450 a month just to pay rent and have three meals a day. Most wages are about one third of that.
The second challenging problem is to lower the 40-percent annual inflation, which means the government has to stop printing money for financing its operations. That also needs foreign currency revenues. Therefore, the discounted oil Iran is now selling to China is a lifeline to prevent further deterioration, but it is far from sufficient to end the economic crisis.
The central bank also highlighted the rising prices of oil and expressed hope that more foreign currency will come its way. “We have encountered favorable conditions both in volume of exports and also their monetary value, which have helped in the availability of foreign currency,” the CBI official said.
Iran’s central bank chairman Ali Salehabadi had said in February that Iran was witnessing a financial improvement overall. He alluded that Tehran had found ways to use the international banking system to execute payments “with friendly countries”, without of course divulging any details.