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Iran Appoints New Central Bank Chief Amid Financial Crisis

By Orkhan Jalilov July 26, 2018

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Iran’s central bank has been sharply criticized for its handling of the ongoing currency crisis. The rial has lost more than half its value against the U.S. dollar over the last year. / Financial Tribune

Iran’s President Hassan Rouhani has replaced the governor of the central bank as the national currency, the Iranian rial, continues to decline.

“The cabinet of ministers of Iran gave a vote of confidence to Abdolnaser Hemmati as the new head of the Central Bank during a meeting on the Wednesday [July 25] morning” the Islamic Republic News Agency (IRNA) reported. 

Hemmati, 61, had previously served as the president of Central Insurance of Iran and managing director of Bank Meli and Sina Bank. He earned a PhD in economics from the University of Tehran and completed his dissertation at the University of London.

“Reforming the country’s banking system, financial and monetary policies, improving our banking relations with the world and developing bilateral monetary treaties, and preserving foreign exchange reserves must be the priorities of the new governor of the Central Bank,” Rouhani said during a recent cabinet meeting, introducing Hemmati, according to Fars News Agency.

The former central bank chief, Valiollah Seif, began his role in 2013, and brought over 30 years of banking experience as a finance director, board member, chairman of the board and managing director of several Iranian banks.

In May, the U.S. Treasury Department imposed sanctions on Seif and other Iranian persons and entities that have been accused of transferring money to the Iranian Revolutionary Guards Corps’ (IRGC) Qods Force; Lebanon's Hezbollah movement; and other organizations. The Treasury Department also sanctioned five members of the IRGC over their alleged support for Yemen’s Houthi militants who have been firing missiles into Saudi Arabia. In addition, nine individuals and firms accused of procuring jet engines and airplane parts for Iranian airlines were also sanctioned.

Iran’s central bank has been sharply criticized for its handling of the ongoing currency crisis in the Middle Eastern and Caspian regions country. The dismissal of Seif comes as the Iranian rial hit a record low, trading above 90,000 against the US dollar in the unofficial market. The rial has lost more than half its value against the U.S. dollar over the last year.

An attempt in April to enforce a fixed rate for the dollar sparked a boom in black market exchanges as the rial’s street value crashed to record lows in June. Currently, one US dollar is bought for 43,776 rials, compared to 35,186 in January, and more than double that in black-market trading.

The fall of the rial has provoked a public outcry over the quick rise of prices of imported consumer goods. The latest wave of protests began on June 24 in Tehran’s markets, a day after protesters closed their shops and marched toward the Iranian Parliament, chanting economic slogans in protest at the existing economic conditions.

At the end of June, to ease tensions that had plunged the rial against the U.S. dollar to a then-record low, the Central Bank of Iran announced its plan to create secondary currency market, which would be dedicated to selling U.S. dollars to importers of essential goods by exporters of non-oil products, such as petrochemicals. The rate of the dollar would be the same as that officially determined by the CBI.

"The main reason behind the dismissal of the central bank’s chief is the public criticism over currency crisis. The Iranian rial hit the new record over the past days, which contributed skyrocketing of consumer prices in the domestic market,” Farhad Daneshvar, economic expert and co-founder of AzerInvest Consulting Group told Caspian News.

“It is crystal clear that the concerns over expected U.S. sanctions have worsened the situation of the national currency. Simultaneously, inflation rate is high in the country. The decision appears to be as a measure to deal with public criticism.”