Billions of Iranian rials poured into Sulaimaniyah exchange market, causing bankruptcy of many locals

28-07-2020 06:04
© Raheb Homavandi © Reuters

Peregraf- Haval Zangana

Qaraman, a money changer with years of experience in exchange market, eventually fell into the trap of the Iranian rial, when he lost over 15 thousand dollars within a week.

In recent days, the money exchange market in the Iraqi Kurdistan’s Sulaimaniyah province turned into a hub for Iranial rial, when its rate to the US dollar sharply crushed: billions of Iranian rial are "smuggled" to Sulaimaniyah’s money exchange market, and in return dollars are "smuggled" to Iran.

Iran is in desperate need of dollars to ease the severe US sanctions on the country. However, Economists claim that the mass rial exchange to dollar in Sulaimaniyah will not rescue the country.

The exchange rate of Iranian rial to US dollar was two million and 500 thousand rials for a hundred dollars in Sulaimnaiyah.

"Personally, I have lost 300 million rials in a week, which is equal to 15 thousand dollars," Qaraman Jumma told Peregraf.

Qaraman, which is a pseudonym of an owner of a money exchange market, says that there are people who have exchanged up to 800 to 900 thousand dollars to Iranian rial. "There are people whose houses  [as a property] have been seized because they have lost their money in exchanging rial."

The huge loss happened recently when the Iranian rial rate to the US dollar significantly collapsed, which caused many locals to lose thousands of dollars.

Last week, the exchange rate of a hundred US dollar to Iranian rial was over a million and 600 rials, attracting people to exchange their capital to Iranian rials, with the expectation that the rate would go down and generate a significant amount of profit. But the opposite happened when the rial lost more than 65 percent of its its value.

Qaraman added that, "Iran has not reserved gold for the currently printed rials, that is why it is losing nothing, for instance, if Iran prints 200 million rials, even if its value is decreasing, it prints as much as the loss and in return they bring back dollars to Iran."

The rials that have been exchanged in Sulaimaniyah is newly designed and printed.

Qaram claimed that Iranian rials are daily smuggled to Sulaimaniyah exchange market in huge amount and in return US dollars are smuggled to Iran, adding that people should avoid exchanging money to rials because its future is unknown.

Sulaimaniyah province shares largest border with Iran and is a trade hub for Iranian rials.

Haji Ali, a pseudonym of an expert in rial exchange market, said that, "I know many people who have lost from five thousand to 40 thousand dollars… these people bought rials with the aim of making profit, but it has further lost its value."

A significant number of people in Sulaimaniyah buy Iranian rials. Despite those who want to make profit, others spend it during their visits to Iran.

Ali said that, for instance, there is an individual whose capital was 20 thousand dollars and borrowed another 20 thousand dollars to buy more Iranian rials, adding that now his total rials are worth 20 thousand dollars, which is equal to bankruptcy.

The value of the Iranian currency has experienced a continuous decline primary because of the US sanctions on the country and the reason for pouring rials into Sulaimaniyah exchange market from Iran is to attain more dollars.

Economist and university instructor, Khalid Haider, told Peregraf that, "buying rials is based on the expectation that if its value increases, then they will make profit… and if it decreases, they will loss money. It is not based on science and is only prediction, so it is playing with fire."

Haider claimed it is better to invest in the stable currencies such as Iraqi dinars and US dollars as well as gold.

He also commented on how helpful the rial exchange in Sulaimaniyah is for Iran and said that, "Iran needs dollars and uses this way to take back dollars to the country for its business with others, but this will not solve the problem that has emerged due to the sanctions."