Rial on the Path to Destruction; A Newspaper Reports Record Capital Outflow

A Tehran-based newspaper has reported a record level of capital outflow from the country, the highest in five years. At the same time, media outlets are reporting a decline in the value of the rial and people's flight from rial-denominated assets. The newspaper 'Ham-Mihan' cited Central Bank statistics in its latest issue on Wednesday, March 13, stating that the net capital account reached negative $15.378 billion in the first half of the current year, marking the lowest balance since 2018. The report emphasized that the net capital account has always been negative in previous years, indicating that capital outflow exceeds inflow into the country. It is important to note that the lack of capital inflow could be due to various factors, including the freezing of assets due to sanctions, but what is happening in Iran is a clear and meaningful movement and a conscious decision not to return capital. The newspaper also pointed out that the economic and political conditions in Iran are such that investors are reluctant to bring their capital back. The report stressed that investor uncertainty in the economy has led to a desire to move capital abroad, with Turkey achieving significant success in attracting Iranian investments in recent years. Statistics on property purchases and company formations in Turkey by Iranians, as well as renting gold bars to meet currency obligations, are among the evidence showing that Iranian capitalists and investors are unwilling to maintain their assets in Iran. Farshad Momeni, an economist and head of the 'Religion and Economy Institute,' told 'Ham-Mihan' that 'waves of human and material capital outflow in Iran have been more than anything else over the past five years subject to currency shocks, and the shock therapy approach that the current government is following more recklessly than previous governments is exacerbating this issue.' The economic conditions in Iran and the hopelessness regarding any potential improvement have reached a point where even small investors are seeking ways to preserve the value of their assets. The newspaper 'Donya-e-Eqtesad' also reported an increasing tendency to hold high liquidity assets compared to those with lower liquidity. According to this newspaper, during the early months of the year until October 2023, the share of cash from total liquidity faced a 1.7% decrease. This newspaper has taken a specialized look at this phenomenon and stated that economic uncertainty in Iran, not only due to international sanctions and political fluctuations but also due to internal challenges such as high inflation, budget deficits, bank imbalances, pension fund issues, and currency instability, has profound and widespread effects on the country's economic foundations. Consequently, the report concluded that this uncertainty can significantly impact individuals' financial choices and specifically lead to a decline in trust in the rial as the national currency. The website 'Khabar Online' has also viewed the issue of the rial's devaluation and people's efforts to escape rial-denominated assets differently. This news website emphasized that, on average, the gold market has increased 50 times, currency prices have risen 35 times, the price of a sample car has increased 43 times, and housing prices have risen over 30 times in the past 12 years. Alongside these markets, the rate of bank deposits has only increased about 6 times recently. According to this news agency, this situation leaves no justification for holding large amounts of rials in banks or with the public, especially in the long term. Following the record-breaking prices of coins and dollars in Iran, the head of economic security police reported the arrest of dozens of 'brokers.' Eggs, the only protein source for workers, as the government seeks a slight increase in wages. Half of Iranians live below the absolute poverty line; the deputy of Raisi stated that wage growth should align with the economic conditions of the country. The continued trend of the national currency's devaluation; the dollar has entered the 58,000-toman channel. Farzin announced that eight Iranian banks are at risk of dissolution.