Successfully reported this slideshow.
We use your LinkedIn profile and activity data to personalize ads and to show you more relevant ads. You can change your ad preferences anytime.

Iran Currency Crisis


Published on

Published in: Business, News & Politics
  • Be the first to comment

  • Be the first to like this

Iran Currency Crisis

  1. 1. Iran Currency Crisis Presented by: Anil Nandyala | Arunachalam Ramanathan | Jigar Kotak | Richa Daruka | Sonam Keshri
  2. 2. AGENDA O Economic Scenario - Iran O Sanctions on Iran by UN & EU O Reasons for imposing sanctions O Post the sanctions O Fiscal Deficit – Iran O Circular Flow of Money O Exchange Rate System O Recommendations by Economists
  3. 3. Economic Scenario - Iran O Iran possesses O 10% of World’s Oil O 15% of World’s Gas reserves O Crude oil composes of 90% of exports O Oil Export O Contributes 42% of GDP O Employs 31% of labor force O Currency of Iran: Rial
  4. 4. Sanctions on Iran by UN & EU Imports: O Ban on the supply of heavy weaponry and nuclear-related technology O Inspection on cargo to stop Iran's acquisition of illicit materials Exports: O Ban on Oil exports to US & EU O Block on Iranian arms exports O Ban on export of key equipment and technology for the refining and production of natural gas Others: O Ban on all trade in gold and other precious metals O Prohibition of financial transactions with Iranian banks
  5. 5. Reasons for Imposing Sanctions O A nuclear-armed Iran would prompt a proliferation cascade in the Middle East O Stockpile of 20% enriched Uranium O Moving towards Israel redline for military action O Not adhering to International Atomic Energy Authority (IAEA)
  6. 6. Post the Sanctions
  7. 7. Fiscal Deficit - Iran Iran is on the verge of a fiscal deficit. It can be reduced if: O Taxes are increased O Iran is a export driven economic nation and unemployment has started because of the sanctions. Government couldn’t earn through taxes. O Funds are borrowed from foreign nations O SWIFT blocked the Iran banks from the global financing system O Money is printed O Iran might go into the state of hyperinflation SWIFT - Society for Worldwide Interbank Financial Telecommunication
  8. 8. Circular Flow of Money
  9. 9. Exchange Rate System O Official Exchange Rate O Available in limited amounts for students, tourists travelling abroad and importers of essential goods like grain, sugar and medicine O $1 = 12,260 Rials O The Non-Reference Rate O 2% lower than the black market exhange rate O Available for importers of non-essential goods O $1 = 25,480 Rials O Black Market Exchange Rate O An illegal exchange which prevails when there is currency devaluation O Because of speculators and panic in Iran, the public started to convert Rials into US Dollars O $1 = 33,500 Rials (as on Oct 1,2012)
  10. 10. Recommendation by Economists O Dollarization O Prevents the state of hyperinflation O Goods and services will be priced in dollars O US inflation rate will be Iran’s inflation rate O Central Bank of Iran will not be able to implement any independent monetary policies
  11. 11. Thank You