By Alireza Ramezani for Al-Monitor. Any opinions expressed are those of the author, and do not necessarily reflect the views of Iran Business News.
The Central Bank of Iran (CBI) has for some time been working on a plan to stop using the US dollar in its financial reports. In a program aired on Iranian state television Jan. 28, CBI Gov. Valiollah Seif vowed that the regulator would no longer use the US currency in its reports starting with the Iranian fiscal year that began March 21. Yet there is no news of an actual change in policy. Indeed, analysts believe that even if the Central Bank is serious about dropping the dollar, the transition process will not go as smoothly as envisaged.
Forbes warned in a January report that the CBI’s decision to phase out the dollar could add a degree of currency risk and volatility. The Iranian economy is not in good shape and any currency shock could jeopardize a fragile recovery and ruin the minor achievements of the monetary regulator in controlling prices over the past few years.
This is particularly the case since crude oil, Iran’s main export, is priced in dollars. Many argue that it could be complicated for the Iranian government to switch its reporting to another currency since billions of dollars in government revenue are generated from oil exports. The CBI disagrees with the notion that it would face problems when it comes to reporting in another currency, but it does not conceal its fear of economic chaos should the dollar be replaced in a short span of time.
CBI officials share concerns about a free fall in the rial’s value against the dollar mainly due to possible public resistance to change. Demand for the US dollar has been high in Iran for several decades. Thus the public is sensitive about any fluctuation in the value of the national currency. In recent years, monetary authorities have been trying to reduce this sensitivity before the introduction of any concrete measures.
The CBI has been striving to sideline the US dollar from its currency basket since the intensification of Western sanctions against Iran over its nuclear program in 2010. So far, it has replaced the greenback with the euro, yuan, ruble and rupee in trade with partners such as the United Arab Emirates, China, Russia, Turkey, Iraq and India. Tehran is even receiving its revenue from oil exports in euros, a source at the CBI who is familiar with the matter told Al-Monitor. “That’s why it’s even more convenient for us to report in euros,” added the source, who spoke on condition of anonymity.