Khaavand: The Central Bank Cannot Change Fundamental Market Data with Circulars

After two days of currency crisis in Iran that raised the price of each US dollar to six thousand tomans, on Monday night, Eshaq Jahangiri, the first vice president of Iran, announced the unification of the dollar rate, stating that the dollar rate would be 4200 tomans starting Tuesday. In this context, we discussed the implications of the Iranian government's and the Central Bank's recent decision with Faridun Khaavand, an economic analyst and university professor. I believe that the government of Mr. Rouhani and the Central Bank have taken a significant risk. Because influencing the currency market in this manner through a decree and circular, or through emergency and disciplinary actions, seems to me to be very difficult, if not impossible. This raises the question of how the Central Bank has approved the rate of 4200 tomans for the dollar. If they implement this, several questions arise: Is the 4200 toman dollar compatible with the country's economic indicators, including the inflation rate? Will the lack of trust in the national currency disappear? Because we must ask whether the factors that raised the dollar to 6000 tomans have been eliminated? Do the factors that create capital flight in Iran and exert pressure on the currency market suddenly disappear? Does the fear of the future of the JCPOA and the possibility of the return of sanctions, which have played a significant role in the recent tensions in the currency market, no longer exist? Will the public's distrust of the banking system, including the Central Bank, disappear? To summarize: will the set of economic and non-economic factors that raised the dollar to 6000 tomans - I repeat, will these factors vanish into thin air with a government decree and a Central Bank circular? I think this decision may have a short-term impact through very drastic actions, but it cannot create a real change in the fundamental data of the market. Another point is that Valiollah Seif, the head of the Central Bank, in a public session held this morning in the Parliament to review the market situation, said he proposed to the leadership that the euro replace the dollar in currency transactions, as he stated that the dollar has no role in foreign transactions, and apparently the leadership welcomed the idea, according to Mr. Seif. Do you think this is a solution, and is it even possible to dollarize the Iranian economy? In Iran, the Islamic Republic has tried in recent years to set aside the dollar as much as possible, for example, using the yuan in its transactions with China and the rupee in its transactions with India. In fact, they calculate in dollars, but impose their national currency on Iran, meaning the yuan for China and the rupee for India, forcing Iran to purchase from their markets. Overall, this is a very difficult task for Iran, because on one hand, we must not forget that Iran's main foreign assets, which come from oil, are in dollars, as oil transactions are mainly conducted in dollars, and on the other hand, the dollar is the most liquid international currency. 63% of the world's central bank reserves are in dollars. Iran can do this [dollarization], but at the cost of very substantial losses, because transactions are calculated in dollars, but later revert to the currencies of this or that country, including the euro. This is indeed possible, but as I mentioned, it significantly reduces Iran's maneuverability in international trade.