Central Bank official cites structural imbalances for rising exchange rates

Mehdi Darabi, assistant to the Chief of the Central Bank of Iran, has identified long-term structural imbalances and chronic government budget deficits as the primary drivers behind the rising exchange rate. He noted that these issues are not recent developments but are the result of accumulated imbalances spanning several decades.

Darabi highlighted several specific factors contributing to currency market volatility. The transition from being a net exporter of gasoline and diesel to a net importer has resulted in the loss of billions of dollars in foreign exchange revenue. Additionally, he pointed to the imbalance within the banking system, particularly among state-owned banks, which stems from years of accumulated debt and undisciplined fiscal policies.

Furthermore, Darabi stated that the current wartime environment has damaged domestic industries and impacted oil sales, which has increased the upward slope of exchange rate growth this year. He also described a cycle where banks recognize profits based on uncollected debts, leading to the government collecting taxes on these nominal profits, which further fuels the financial cycle.