• Wed / 15 July 2020 / 14:12
  • Category: Economy
  • News Code: 99042518920
  • Journalist : 99999

Professor Hanke's suggestion to make rial a credible currency

Professor Hanke's suggestion to make rial a credible currency

Tehran (ISNA) – Iranian rial plumbed new lows against the Dollar in the recent days. For discussing the reasons for this performance and the ways to stabilize the currency market we’d asked professor Hanke for a commentary.

Steve Hanke is a Professor of Applied Economics at the Johns Hopkins University in Baltimore (USA). He is one of the world's leading experts on currency boards and measuring and stopping hyperinflations.

Why did the Rial depreciate further?

Asking about the reason behind the latest performance of Rial, Hanke said, “Main reason for the rial's recent bout of weakness is that the rial is not a credible currency. Therefore, when the public senses that storm clouds are gathering, they dump the rial and exchange it for USD or gold as fast as they can”.

"The trend, broadly speaking, for the rial since the revolution has been one of a steady loss in purchasing power," Prof. Hanke said, adding "It is impossible to predict and anticipate exactly what the speed of deterioration in the rial will be going forward. It will depend on events".

UAE dirham and Saudi Arabia's rial are not perfectly credible

Some countries like UAE and Saudi Arabia had pegged their currency to Dollar, as a result, they can now enjoy some level of stability in their currency market while Coronavirus hitted their economy.

Asked about whether doing something like that or establishing a currency board and using a gold bar can help to solve the current crisis, Professor Hanke said: “As I have repeatedly stated, the UAE and Saudi Arabia have pegged exchange rates. They are not perfectly credible. In order to be perfectly credible, you will need a currency board system like the one I have recommended for Iran”.

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