TEHRAN, Iran — Fluctuation in the value of the rial became a common occurrence in Iran during the presidency of Mahmoud Ahmadinejad, and especially in the latter years. Foreign currencies would get more expensive by the day — and sometimes even by the hour. When Ahmadinejad first took office in 2005, the dollar traded for 8,200 Iranian rials. In the days before the election of President Hassan Rouhani in June 2013, the greenback cost some 36,000 rials — four times as much.

In contrast, once Rouhani took office, fluctuations in the rial’s value not only became a rarity but the Iranian currency became stronger. For instance, in January 2014, the greenback traded for some 29,000 rials on the open market. However, in the past month, the rial has suddenly been weakening. The dollar rate had stayed around 35,000 rials for an extended period, but in November, things started to change. After the election of Donald Trump as president of the United States, Iran was also affected by the subsequent tense political atmosphere around the world. Demand for the dollar in Iran had increased from the day before the US election, and when Trump’s victory was announced, the price of the greenback jumped to 37,000 rials on the open market. In the last week of November, it even reached 40,000 rials. This sudden spike in the exchange rate resulted in an effective halt in currency trading on the open market, with many exchange offices removing the greenback from their lists of available currencies. Though some experts believe that the jump is merely a short-term bubble, others think that the rial needs to weaken to reflect its true value.

Prominent Iranian economist Saeed Laylaz, who teaches economic history at Shahid Beheshti University, spoke to Al-Monitor about what has been going on in the past weeks. He said, “The increase in the exchange rate of foreign currencies is related to economic conditions. During the past three years, the exchange rate has not increased naturally and in accordance with the current inflation rate. The more accurate the exchange rate is — and closer to reality — the better it is for the economy. This increase has occurred naturally and thus it will not cause inflation.”

Some believe that the Rouhani administration has willfully weakened the rial on the open market in order to make up for a budget deficit in the coming Iranian fiscal year (beginning March 20, 2017). This practice was pioneered by the Ahmadinejad administration, which repeatedly toyed with the rial exchange rate on the open market in order to compensate for budget deficits and to fund outstanding payments to contractors and government employees. This is achieved by making use of the arbitrage between the official and open market rates, which is currently some 20%. In other words, the government can get more rials per dollar since oil — one of its main sources of revenue — is priced in foreign currency and converted to rials with the lower official exchange rate in the budget. On Dec. 3, the head of the Investment Group of Iran’s Chamber of Commerce, Hassan Salimi, spoke about this issue and said, “The Rouhani administration believed that it could sell oil for $65 to $70 a barrel in 2017, but now it is certain that the price of oil will not increase and will stay around $50. Therefore, to make up for the [budget] deficit, it has increased the exchange rate.”