Impact of the Informal Currency Market on Price Determination; An Economist: Government Officials' Statements are Surprising

The ILNA news agency quoted an economic expert criticizing the statements of senior officials of the Islamic Republic's government, stating that the Central Bank and the Ministry of Economy must understand that in an economy, prices are determined by "final units and margins (profit margins)." Kamran Nedari, former head of the Islamic Banking Group at the Monetary and Banking Research Institute, added that although "95 percent of goods are purchased with preferential currency," if there is not a hundred percent control or if it is weak, the price is not determined by the exchange rate with which the goods were imported, but rather by "the marginal market exchange rate and this exchange rate in the informal market determines it, and this is a fundamental principle." According to him, the increase of 5 to 6 thousand tomans in the exchange rate is "certainly inflationary" and it should be noted that the dollar rate has increased from 50 thousand tomans to 55 thousand tomans, and certainly, "currency jumps exacerbate the inflation issue." Last month's series of attacks by the US-led international maritime coalition against the Houthi militants in Yemen, supported by the Islamic Republic, caused the exchange rate of each US dollar to the Islamic Republic's rial in the free currency market of Iran to rise to 59 thousand tomans, and some goods also faced severe price fluctuations. In this context, John Kirby, the White House National Security Council communications advisor, emphasized the effectiveness of the US Navy's preemptive strikes against the Houthis in Yemen in a conference call. Kamran Nedari, in part of his remarks published by ILNA, commented on the recent statements of the Central Bank president and the Minister of Economy regarding their non-recognition of the free currency market, saying: "I am surprised by these statements." He stated that "previous Central Bank presidents" also made such statements, but the reality is that the necessary currency may have been supplied at the "42 thousand tomans" rate, but "if there is no control," at the time of selling the same goods, the final rate is calculated at "55 thousand tomans," therefore the free market exchange rate is very, very important. These statements by the president of the Islamic Republic's Central Bank and the Minister of Economy and Finance, Ebrahim Raisi, come at a time when the Tehran-based newspaper "Donya-e-Eqtesad" reported on Wednesday, February 21, that the Support Organization accepted the request of private sector automakers for "price increases" of their products due to "changes in the source of currency supply," resulting in a "significant amount" added to the prices of assembled cars. The Secretary-General of the Iran-Iraq Joint Chamber considered the "removal of the dollar from transactions" as an "opportunity." Pilgrims to Mecca will be "Hajji" with a dollar rate of 39 thousand tomans. The inflation rate of medicine has exceeded 80 percent, and dentistry has fallen out of priority. An economist warned of an economic collapse: a 60 percent inflation rate is not far-fetched. Market regulation is at the expense of the producer; the mystery of chicken prices. The Central Bank sold gold bars at the free dollar price to control the dollar; along with the increase in the exchange rate, the price fluctuations of meat and chicken in the free and official markets.