1. Iran Currency Crisis
Presented by:
Anil Nandyala | Arunachalam Ramanathan | Jigar Kotak | Richa Daruka | Sonam Keshri

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. 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. 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. 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. Post the Sanctions

9. 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

10. Circular Flow of Money

11. 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)

12. 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

13. Thank
You