The approval to knock four zeroes off Iran’s currency will make day-to-day life easier for its people, but will do little to solve the country’s underlying economic woes without meaningful reform, analysts say.
The rial “has lost so much value against the US dollar [that] if you take some zeroes off it helps to make it look as if the currency is so much stronger,” Barbara Slavin, director of the Future of Iran Initiative at the Atlantic Council, said.
Iran’s parliament passed a bill allowing the government to change its national currency to the toman, which is equal to about 10,000 rials, Reuters reported on Monday, citing the official Students News Agency, although the decision still needs to be approved by a clerical body that vets legislation before it takes effect.
“Iranians have continued, and this is something that goes back to before the revolution, to refer to tomans, not rials. So it’s a familiar currency,” Ms Slavin said, adding that the change of currency also gave the opportunity to replace old banknotes in a country that has been hit hard by the Covid-19 outbreak.
Esfandyar Batmanghelid, founder of Bourse & Bazaar, a think tank focused on Iran's economy, believes the redenomination is "part of the groundwork being laid for the possible unification of the official and free-market exchange rates”.
Iran’s official exchange rate is 42,000 to the US dollar, but on the black market it trades at about 156,000 rials per dollar.
A plan to unify the two will only work if it goes hand-in-hand with structural reforms, he said.
“Encouragingly, the central bank and the Rouhani administration understand this, but there are vested interests that benefit from the dual rates and the reforms will be hard fought,” he said.
“The big problem is this is just one, tiny initiative," said Robert Mogielnicki, resident scholar of the Arab Gulf States Institute in Washington.
"The redenomination of Iran’s currency does not address the underlying weaknesses at the heart of Iran’s fragile financial system: economic isolation owing to sanctions and, to a certain extent, economic policy mismanagement," Mr Mogielnicki said. "Believing that this decision alone will have a positive impact is roughly equivalent to thinking that one can extinguish a fire by painting the fire hydrant a new colour.”
Iran’s economy has been weakened by US sanctions imposed by president Donald Trump’s government on the country and its policy of exerting “maximum pressure” on Tehran. Lower oil prices and the economic impact caused by the Covid-19 outbreak have exacerbated its problems. Iran has reported more than 98,000 Covid-19 infections and 68,000 deaths.
"The country has limited tools at its disposal for conducting additional monetary policy measures"
The International Monetary Fund had forecast a return to growth after a 7.6 per cent slump in GDP last year, but revised its forecast in last month’s World Economic Outlook to a further 6 per cent decline.
Inflation is set to come down, but only marginally, to 34.2 per cent this year from 41.1 per cent and unemployment is forecast to continue rising, to reach 16.3 per cent of the total labour force during 2020, according to the fund.
The government's fiscal deficit is set to widen to 9.9 per cent of GDP this year, an increase from 5.7 per cent last year, according to the lender's projections.
“Iran was showing signs of recovery in the later half of 2019, with key sectors like manufacturing growing again after a painful adjustment to the reimposition of secondary sanctions by the United States. But the Covid-19 outbreak has derailed that recovery,” said Mr Batmanghelid.
Mr Mogielnicki said that key to reforms should be a strengthening of its fragile banking sector, which has suffered from “heavy state involvement”.
Official records for banks’ non-performing loans for 2017 stood at 11.4 per cent in 2017, while capital adequacy ratios for some banks remain significantly below the 10.5 per cent recommended under Basel III global standards.
Reforms to cut Iran's deficit and reduce subsidies are also needed, but could be difficult to implement, Mr Mogielnicki said.
"I am very pessimistic about policymakers’ ability to confront these issues. If we see some of these NPLs starting to tank and there is a collapse of trust in the banking sector more generally, which leads to a run on banks, this is something that is going to be very difficult [to contain]," Mr Mogielnicki said.
"The country has limited tools at its disposal for conducting additional monetary policy measures," he said, adding "we’re still going to see a situation in 2020 where the government is really going to be scrambling for financial resources. The outlook has gone from grim to quite dire."
KEY DEVELOPMENTS IN MARITIME DISPUTE
2000: Israel withdraws from Lebanon after nearly 30 years without an officially demarcated border. The UN establishes the Blue Line to act as the frontier.
2007: Lebanon and Cyprus define their respective exclusive economic zones to facilitate oil and gas exploration. Israel uses this to define its EEZ with Cyprus
2011: Lebanon disputes Israeli-proposed line and submits documents to UN showing different EEZ. Cyprus offers to mediate without much progress.
2018: Lebanon signs first offshore oil and gas licencing deal with consortium of France’s Total, Italy’s Eni and Russia’s Novatek.
2018-2019: US seeks to mediate between Israel and Lebanon to prevent clashes over oil and gas resources.
AI traffic lights to ease congestion at seven points to Sheikh Zayed bin Sultan Street
The seven points are:
Shakhbout bin Sultan Street
Dhafeer Street
Hadbat Al Ghubainah Street (outbound)
Salama bint Butti Street
Al Dhafra Street
Rabdan Street
Umm Yifina Street exit (inbound)
MATCH INFO
Syria v Australia
2018 World Cup qualifying: Asia fourth round play-off first leg
Venue: Hang Jebat Stadium (Malacca, Malayisa)
Kick-off: Thursday, 4.30pm (UAE)
Watch: beIN Sports HD
* Second leg in Australia scheduled for October 10
RESULTS
2pm: Handicap (PA) Dh40,000 (Dirt) 1,000m
Winner: AF Mozhell, Saif Al Balushi (jockey), Khalifa Al Neyadi (trainer)
2.30pm: Maiden (PA) Dh40,000 (D) 2,000m
Winner: Majdi, Szczepan Mazur, Abdallah Al Hammadi.
3pm: Handicap (PA) Dh40,000 (D) 1,700m
Winner: AF Athabeh, Tadhg O’Shea, Ernst Oertel.
3.30pm: Handicap (PA) Dh40,000 (D) 1,700m
Winner: AF Eshaar, Bernardo Pinheiro, Khalifa Al Neyadi
4pm: Gulf Cup presented by Longines Prestige (PA) Dh150,000 (D) 1,700m
Winner: Al Roba’a Al Khali, Al Moatasem Al Balushi, Younis Al Kalbani
4.30pm: Handicap (TB) Dh40,000 (D) 1,200m
Winner: Apolo Kid, Antonio Fresu, Musabah Al Muahiri
Napoleon
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UAE currency: the story behind the money in your pockets
Who was Alfred Nobel?
The Nobel Prize was created by wealthy Swedish chemist and entrepreneur Alfred Nobel.
- In his will he dictated that the bulk of his estate should be used to fund "prizes to those who, during the preceding year, have conferred the greatest benefit to humankind".
- Nobel is best known as the inventor of dynamite, but also wrote poetry and drama and could speak Russian, French, English and German by the age of 17. The five original prize categories reflect the interests closest to his heart.
- Nobel died in 1896 but it took until 1901, following a legal battle over his will, before the first prizes were awarded.
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Thanksgiving meals to try
World Cut Steakhouse, Habtoor Palace Hotel, Dubai. On Thursday evening, head chef Diego Solis will be serving a high-end sounding four-course meal that features chestnut veloute with smoked duck breast, turkey roulade accompanied by winter vegetables and foie gras and pecan pie, cranberry compote and popcorn ice cream.
Jones the Grocer, various locations across the UAE. Jones’s take-home holiday menu delivers on the favourites: whole roast turkeys, an array of accompaniments (duck fat roast potatoes, sausages wrapped in beef bacon, honey-glazed parsnips and carrots) and more, as well as festive food platters, canapes and both apple and pumpkin pies.
Ruth’s Chris Steakhouse, The Address Hotel, Dubai. This New Orleans-style restaurant is keen to take the stress out of entertaining, so until December 25 you can order a full seasonal meal from its Takeaway Turkey Feast menu, which features turkey, homemade gravy and a selection of sides – think green beans with almond flakes, roasted Brussels sprouts, sweet potato casserole and bread stuffing – to pick up and eat at home.
The Mattar Farm Kitchen, Dubai. From now until Christmas, Hattem Mattar and his team will be producing game- changing smoked turkeys that you can enjoy at home over the festive period.
Nolu’s, The Galleria Mall, Maryah Island Abu Dhabi. With much of the menu focused on a California inspired “farm to table” approach (with Afghani influence), it only seems right that Nolu’s will be serving their take on the Thanksgiving spread, with a brunch at the Downtown location from 12pm to 4pm on Friday.
Wicked: For Good
Director: Jon M Chu
Starring: Ariana Grande, Cynthia Erivo, Jonathan Bailey, Jeff Goldblum, Michelle Yeoh, Ethan Slater
Rating: 4/5
What is a Ponzi scheme?
A fraudulent investment operation where the scammer provides fake reports and generates returns for old investors through money paid by new investors, rather than through ligitimate business activities.
U19 WORLD CUP, WEST INDIES
UAE group fixtures (all in St Kitts)
Saturday 15 January: v Canada
Thursday 20 January: v England
Saturday 22 January: v Bangladesh
UAE squad
Alishan Sharafu (captain), Shival Bawa, Jash Giyanani, Sailles Jaishankar, Nilansh Keswani, Aayan Khan, Punya Mehra, Ali Naseer, Ronak Panoly, Dhruv Parashar, Vinayak Raghavan, Soorya Sathish, Aryansh Sharma, Adithya Shetty, Kai Smith
RESULTS
6pm: Al Maktoum Challenge Round-2 – Group 1 (PA) $55,000 (Dirt) 1,900m
Winner: Rajeh, Antonio Fresu (jockey), Musabah Al Muhairi (trainer)
6.35pm: Oud Metha Stakes – Rated Conditions (TB) $60,000 (D) 1,200m
Winner: Get Back Goldie, William Buick, Doug O’Neill
7.10pm: Jumeirah Classic – Listed (TB) $150,000 (Turf) 1,600m
Winner: Sovereign Prince, James Doyle, Charlie Appleby
7.45pm: Firebreak Stakes – Group 3 (TB) $150,000 (D) 1,600m
Winner: Hypothetical, Mickael Barzalona, Salem bin Ghadayer
8.20pm: Al Maktoum Challenge Round-2 – Group 2 (TB) $350,000 (D) 1,900m
Winner: Hot Rod Charlie, William Buick, Doug O’Neill
8.55pm: Al Bastakiya Trial – Conditions (TB) $60,000 (D) 1,900m
Winner: Withering, Adrie de Vries, Fawzi Nass
9.30pm: Balanchine – Group 2 (TB) $180,000 (T) 1,800m
Winner: Creative Flair, William Buick, Charlie Appleby
MATCH INFO
Uefa Champions League semi-final, first leg
Tottenham 0-1 Ajax, Tuesday
Second leg
Ajax v Tottenham, Wednesday, May 8, 11pm
Game is on BeIN Sports
The Voice of Hind Rajab
Starring: Saja Kilani, Clara Khoury, Motaz Malhees
Director: Kaouther Ben Hania
Rating: 4/5
Scoreline
Saudi Arabia 1-0 Japan
Saudi Arabia Al Muwallad 63’
UK’s AI plan
- AI ambassadors such as MIT economist Simon Johnson, Monzo cofounder Tom Blomfield and Google DeepMind’s Raia Hadsell
- £10bn AI growth zone in South Wales to create 5,000 jobs
- £100m of government support for startups building AI hardware products
- £250m to train new AI models
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Al Jazira's foreign quartet for 2017/18
Romarinho, Brazil
Lassana Diarra, France
Sardor Rashidov, Uzbekistan
Mbark Boussoufa, Morocco
Multitasking pays off for money goals
Tackling money goals one at a time cost financial literacy expert Barbara O'Neill at least $1 million.
That's how much Ms O'Neill, a distinguished professor at Rutgers University in the US, figures she lost by starting saving for retirement only after she had created an emergency fund, bought a car with cash and purchased a home.
"I tell students that eventually, 30 years later, I hit the million-dollar mark, but I could've had $2 million," Ms O'Neill says.
Too often, financial experts say, people want to attack their money goals one at a time: "As soon as I pay off my credit card debt, then I'll start saving for a home," or, "As soon as I pay off my student loan debt, then I'll start saving for retirement"."
People do not realise how costly the words "as soon as" can be. Paying off debt is a worthy goal, but it should not come at the expense of other goals, particularly saving for retirement. The sooner money is contributed, the longer it can benefit from compounded returns. Compounded returns are when your investment gains earn their own gains, which can dramatically increase your balances over time.
"By putting off saving for the future, you are really inhibiting yourself from benefiting from that wonderful magic," says Kimberly Zimmerman Rand , an accredited financial counsellor and principal at Dragonfly Financial Solutions in Boston. "If you can start saving today ... you are going to have a lot more five years from now than if you decide to pay off debt for three years and start saving in year four."
