Iranian Rial Plunges to Historic Low

Latest Developments

The Iranian rial plummeted to a historic all-time low on March 4, trading at about 600,000 to the U.S. dollar in the unregulated market. Amid escalating tensions in the region, Iran’s rial has lost about 20 percent of its value since January 2024. Prior to Washington’s withdrawal from the nuclear deal with Iran in May 2018, the rial traded around 60,000 to the U.S. dollar.

Iran’s complex foreign market operates within distinct and legally separated segments. It features three primary exchange rates: the central bank rate, set at an artificially low cost for purchasing limited imports; the unregulated market rate; and the rate for the NIMA platform, a new currency exchange program established in 2018 for imports and exports that places a higher value on the rial than the open market or central bank rate. The NIMA platform (an acronym for Iran’s Foreign Exchange Management Integrated System) was created as part of Iran’s strategy to evade sanctions and is the most important in Iran’s fractured foreign exchange system, since the platform funds the majority of exports. The rial’s depreciation, paired with Iran’s 40 percent inflation rate, has further exacerbated the socio-political grievances of Iranians.

The free-market exchange rate and the NIMA rate have faced increasing disparities, particularly over the past year, which is notable for several reasons. Wide gaps signal underlying instability or market inefficiencies. The discrepancies can also impact competitiveness, affecting the profitability of businesses engaged in international trade. When the disparity widens significantly, individuals with access to foreign currency are more incentivized to bypass legal and regulatory barriers to sell their assets in markets where prices are higher.

Expert Analysis

“The gap between the free-market exchange rate and the NIMA rate has been widening over the last few months. A widening gap is not sustainable, and we should see an increase in the NIMA rate unless the central bank decides to bring the free-market rate down by ramping up the injection of foreign currency into the market, which under current conditions is neither wise nor sustainable.” — Saeed Ghasseminejad, FDD Senior Advisor on Iran and Financial Economics

“Iranian President Ebrahim Raisi ran on promises of stabilizing the exchange rate and liquidity management, whereas his administration has failed to substantively address any of these indicators. This further demonstrates why the discourse among Iranians has shifted from seeking change through the framework of the Islamic Republic to calling for an end to the regime, as indicated by the record-low turnout in the recent parliamentary elections.” — Janatan Sayeh, FDD Research Analyst

Related Analysis

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“CBI Revoking Bank Melli’s License Is Unlikely to Curb Iran’s Sanction Evasion in Iraq,” by Janatan Sayeh

“To Fight the Rial’s Plunge, Tehran Resorts to Tactics that Failed Before,” by Saeed Ghasseminejad