According to the International Iranian Stone Exhibition, the government has considered the exchange rate of 11500 new in the budget bill of 1400. However, the Islamic Consultative Assembly Integration Commission has increased this rate to 17,500 Tomans. Given the severe impact of the country's economy from exchange rate fluctuations, such a decision will have many possible consequences, and this issue has caused concern among market participants.

The currency of 17,500 Tomans will disappoint many

In recent years, the foreign exchange market has been accompanied by many fluctuations and shocks, and has experienced issues and problems such as multiple prices, multiple markets, multiple price increases, and the like. The existing problems caused this market to be far away from the characteristics of a natural market, which operates on the basis of supply and demand, and this gap and distance is constantly increasing.

After the final results of the US elections and the departure of Donald Trump, not only in Iran but all over the world, economic activists hoped for the future and positive reactions were observed in the markets. Inside the country, not only did the irrational rise in prices in the car, gold, housing and foreign exchange markets end, but they also saw a downward trend and experienced a significant decline; Talk of dollars below 20,000 tomans and even 15,000 tomans was heard among the people. But the exchange rate did not fall as expected.

$ 17,500 prevents the exchange rate from falling

As experience has shown that the dollar exchange rate in the open market has always been higher than the exchange rate, it is expected that the approval of 17,500 USD by the Merger Commission will become the main obstacle to the favorable reduction of the dollar exchange rate. Because it creates a new price floor that will be the basis for pricing in the open market. On the other hand, this action of the Parliamentary Commission means recognizing the multiplier devaluation of the national currency.

In the foreign exchange market, different types of currencies are exchanged against the national currency. From the point of view of economists, the exchange rate of countries is usually determined by long-term and fundamental trends in the economy. For example, a slowdown in economic growth, rising inflation, a government budget deficit, expansionary policies and, consequently, an increase in the supply of domestic money, and the like, will lead to a devaluation of a country's national currency against other currencies. In fact, what is happening in practice is not an increase in the exchange rate but a devaluation of the national currency. Exchange rate fluctuations are nothing but national currency fluctuations.

All sectors of the economy, from production and distribution to consumption and services, have been affected by currency fluctuations and have themselves been volatile. Therefore, proper foreign exchange policies and regulating the foreign exchange market are undeniable necessities of the country's economy, especially in the current situation.

However, controlling currency fluctuations and solving the problem of devaluation of the national currency in general is possible not by increasing the exchange rate but by strengthening the economic foundations of the country. Perhaps this is why "Abdul Nasser Hemmati", the governor of the Central Bank, has opposed the increase of the exchange rate to 17,500 Tomans and considered it to the detriment of the country's economy.

In this regard, he said: Determining the rate of 17,500 Tomans per dollar and recognizing this exchange rate in the budget, considering the recent successes in exporting oil and oil products and neutralizing the current sanctions on the one hand, and the process On the other hand, I do not think that the developments and the possibility of reducing sanctions next year will benefit the country's economy. Instead of raising the exchange rate in the budget, the calculation basis of which has not been determined, it is better to focus the system's efforts on exporting more oil, which is the right of the Iranian people.

In defense of setting the rate of 17,500 Tomans as the exchange rate, it has been said that the goal is to unify the exchange rate and prevent rents due to multi-rate currency, especially 4200 Tomans. The need for a single exchange rate is not hidden from anyone and has always been emphasized by various experts and thinkers. However, its implementation requires, on the one hand, the provision of various economic and social infrastructures, and, on the other hand, careful planning and determination of the mechanisms for its implementation in full detail in order to anticipate and control the possible consequences.

If the country's economy is not in constant interaction with the global economy and the foundations of production and economic growth are not strengthened, it will not be possible to unify the exchange rate. The value of the national currency and the exchange rate will move in completely opposite directions. As one increases, the other decreases. The strength of the economy will determine which increases and which decreases.

Risk of rising inflation

If Biden returns to the UN Security Council and the sanctions are reduced on the one hand, and "F. approval. Oh you. T. On the other hand, there will be the possibility of positive economic growth, more exports and an increase in government foreign exchange earnings, and the strength of the national currency against the dollar and other foreign currencies will increase. In this case, the budget of 1400 will not face a deficit and inflation will be reduced and controlled. In that case, we do not need to increase the exchange rate to positively balance the operating balance of the budget and equalize government revenues and expenditures.

In the current state of the country's economy, the least consequence of the 17,500 toman currency will be an increase in the inflation rate. Increasing the country's liquidity and monetary base will mean higher inflation and a devaluation of the national currency. A vicious circle will be formed that will never allow the currency to become a single currency and strengthen the national currency.

* IRNA