Mahmoud Ahmadienjad

The Ahmadinejad administration approved a hike in bank interest rates on Wednesday in an attempt to halt the fall of the national currency. The value of the rial has spiralled out of control since new Western sanctions were announced against the Islamic Republic.

IRNA reported that Economy Minister Shamseddin Hosseiny announced that interest rates would increase to as much as 21 percent.

The Central Bank has also announced that foreign currency should only be purchased for travel and Iranians should refrain hoarding dollars.

The statement attests to the fact that many people have been trying to transfer their money into dollars in view of the rial’s troubling fall.

The president’s decision to hike the bank rates is a complete reversal of policy. Mahmoud Ahmadinejad had earlier vetoed a proposal by Central Bank chief Mahmoud Bahmani to increase interest rates.

Ahmadinejad’s representative in Parliament told ISNA that the Central Bank’s latest move will soon burst the bubbles around foreign currency and gold.

News of the rate hike has already resulted in a decline in the price of gold; however, the effect on the rial’s exchange rate has been negligible.