The Iranian rial hit a new record low on Wednesday as the country’s economy enters its most dire straits yet, amid a U.S. blockade of the Strait of Hormuz.
The currency remained stable during the war, but beginning on April 27, demand for foreign banknotes suddenly flooded the open market. The U.S. naval blockade has prevented Iran from acquiring foreign currency through exports, leading the rial to enter a precipitous decline after already faring poorly last year. The Iranian Student News Agency said that the rial fell roughly 15% in two days, with Wednesday’s exchange rate sitting at 1.81 million rials to every one U.S. dollar.
The rial had already collapsed in value last year, losing 70% against the U.S. dollar.
The currency devaluation comes amid sky-high inflation, which, according to Iran’s central bank, was 65.8% from March 20 to April 20, Reuters reported.
The devalued currency is another sign of Iran’s collapsing economy, which is now at its worst point. Gholamhossein Mohammadi, an official at Iran’s Labor and Social Affairs ministry, said that one million Iranians have been put directly out of work since the war began, and another one million have been put out of work indirectly.
“Living is not affordable anymore,” Mahdi Ghodsi, of the Vienna Institute for International Economic Studies, told the Wall Street Journal. “Iran is at its weakest point.”
IRAN FACES DEATH BLOW BECAUSE OF WAR
Currency devaluation and inflation triggered the December protests that culminated in Tehran’s brutal crackdown in January, during which international watchdogs say tens of thousands of peaceful protesters were killed. The economy is now much worse than when the protests began, raising the possibility of new protests.
Research Fellow and Middle East expert Zineb Riboua, at the Hudson Institute, told the Washington Examiner in mid-March that several indicators suggested Iran’s economy was in a death spiral. She noted that the rial appreciated by 13% at the time, indicating the central bank is drawing down reserves or assets were being mobilized through back channels. The artificial appreciation led to the predicted inflation, and it is set to get worse.