Iranian President Masoud Pezeshkian discussed the foreign exchange market, liquidity, inflation and the balance of payments during a three-hour meeting at the central bank, two days after the rial fell to a record low and Washington announced an expanded campaign to “choke” Iran’s economy.
Pezeshkian stressed the need to maintain economic stability and curb inflation expectations amid war, an economic blockade and external pressure, calling for full coordination between the central bank and institutions responsible for managing financial and currency markets, state news agency ISNA reported.
The Iranian president reviewed reports on liquidity levels, the foreign exchange market, the international balance of payments, monetary regulation policies and measures planned to steer the economy during and after the war.
Pezeshkian called for continued meetings with economic experts and for their proposals to be considered in shaping monetary, fiscal, banking, trade and corporate management policies. He also urged officials to explain the country’s economic problems to Iranians directly and transparently.
The meeting came after the United States imposed a new package of sanctions targeting about 60 individuals, entities and vessels, while expanding the risk of secondary sanctions to the digital assets, technology, gold, aviation and shipping sectors.
US Treasury Secretary Scott Bessent said Washington was seeking to sever “every economic lifeline” keeping the Iranian government afloat, pledging to hold accountable countries and companies that continue to deal with Tehran.
Pezeshkian said Tehran would continue to resist economic pressure, arguing that just as the United States had failed to achieve its objectives in the war, it would also fail through economic pressure.
Fuel stations
Pressure on the currency and prices coincided with disruption in the fuel market. Fuel stations in Tehran saw growing lines of cars and motorcycles on Tuesday after authorities announced a rare reduction in long-standing fuel quotas and imposed higher prices on purchases exceeding the allocated amounts.
Brent crude, meanwhile, fell below $90 a barrel on Tuesday as markets interpreted the new US sanctions as reducing, for now, the prospect of a resumption of large-scale military operations, despite continued risks to shipping through the Strait of Hormuz.
The dollar breached the 2-million-rial mark for the first time on Monday, trading at about 2.02 million rials on the open market, compared with an official central bank rate of about 1.5 million rials.
The dollar was worth about 1.65 million rials before the war began on Feb. 28, reflecting a further decline in the currency over the past six months.
Central Bank Governor Abdolnasser Hemmati sought to calm markets, describing the latest rise in foreign currency prices as “temporary” and saying the current volatility did not warrant a change in monetary policy direction.
He said the central bank had supplied the economy with an average of $175 million in foreign currency a day since the start of the Iranian year, compared with about $205 million during the same period a year earlier.
Hemmati announced a plan to allocate $20 billion to meet the industrial sector’s foreign-currency needs through the end of the year and pledged to supply the currency needed for medicines and essential goods.
He said the central bank had anticipated the outbreak of war since February and had therefore distributed foreign currency reserves across “different locations” that could be accessed when needed to secure essential supplies.
Hemmati described the past six months as “extremely difficult” but drew a distinction between enduring pressure and the “collapse” that authorities say the United States is seeking to force upon Iran’s economy.
He pledged to focus on curbing inflation and the currency’s decline, saying the central bank could not “print money without purpose and increase liquidity”.
Official data showed that annual inflation reached 66% in July, while consumer prices rose 87.9% from the same month a year earlier and food-price inflation reached 128%.
Rice prices have risen about 60% since the war began, while beef prices have increased by more than 150%, according to the Associated Press. The International Monetary Fund expects Iran’s economy to contract by more than 5%.
Financing production
The central bank plans to provide 700 trillion tomans to finance production through instruments it says do not rely on issuing new money.
Deputy Governor for Monetary Policy Vahid Majid said financing provided through instruments linked to production chains reached 197 trillion tomans during the first four months of the current Iranian year, as the bank seeks to expand “sustainable, non-inflationary financing”.
The central bank is also working to give exporters and importers greater flexibility in foreign currency trading, including by allowing direct agreements between the two sides and reducing the role of some intermediaries.
Hossein Tajiknejad, an official responsible for foreign currency allocation, said the central bank no longer purchased foreign banknotes itself but had allowed banks and importers to buy them at mutually agreed prices.
Tehran is also facing mounting restrictions on its foreign trade channels after the United Arab Emirates announced last week that it was suspending trade dealings with Iran, while the new US sanctions threaten companies and countries that continue to provide it with financial and commercial channels.
China, the largest buyer of Iranian oil and one of Tehran’s leading trading partners, warned that it would defend its interests after Washington announced the expansion of secondary sanctions.
Chinese Foreign Ministry spokesperson Lin Jian said the policy of “maximum pressure” and economic warfare would not resolve problems, warning that such measures could destabilize the global economic and financial system and harm other countries’ rights.
He said Beijing would “take all necessary measures” to protect its interests, posing a test of Washington’s ability to enforce the new restrictions on Iranian trade, particularly regarding Chinese-Iranian economic ties.
Iranian Economy Minister Ali Madanizadeh said his country had prepared a “two-year plan” to counter the new sanctions and that Washington would not achieve through economic pressure what, in his words, it had failed to achieve militarily.
