(Bloomberg) -- Half of Iran’s lawmakers have written to President Hassan Rouhani demanding the removal of the central bank chief, accusing him of mismanaging the banking industry and currency markets as the rial weakened to a record low.
Iran has witnessed “instability in the management of banks and credit institutions” under Governor Valiollah Seif, state-run Tasnim news agency quoted Javad Abtahi, one of 160 legislators to sign the letter, as saying. The governor has “repeatedly said that the situation in the currency market is under control but each time we’re seeing the opposite.”
The rial has slumped against the dollar in the unregulated market as the U.S. nears a May 12 deadline to stay in or withdraw from the 2015 nuclear deal that removed a host of sanctions on Iran’s economy, and amid political feuding at home. Leaders have pointed the finger at enemies overseas as they responded with a decision to unify the exchange rate, and arrested several unlicensed traders.
As tensions with the U.S. have deepened, state media reported Wednesday that Iran’s central bank would dump the dollar and manage its local currency primarily using the euro.
During a speech to parliament earlier this month, lawmakers circled around Seif with shouts of “resign,” prompting Speaker Ali Larijani to restore order.
Even if Seif goes, however, it is unlikely a successor would have the power to resolve broader structural issues that have stymied the Iranian economy, particularly with the prospect of further international sanctions hanging over the country.
“It’s a strong signal but the members of parliament themselves know that even if he goes the problem will not disappear with him,” said Mazdak Rafaty, managing partner at United Arab Emirates-based Ludwar International Consulting, which advises European companies operating in the Middle East. “Nobody else can tackle these issues in that position and bring solutions because they are not in the central bank’s hands.”
Seif has delivered on several fronts. Under his leadership inflation was curbed, as promised, to 9.6 percent from a high of 40 percent when Rouhani first took power. Banks’ bad loans dropped by 15 percent to $26.6 billion -- and now stand at about 11 percent of total lending -- compared with the start of the president’s first term in 2013.
But Iranian concerns about slipping back into isolation as U.S. President Donald Trump’s threatens to withdraw from the nuclear deal, have roiled currency markets over the past two months, with the rial plummeting as demand for dollars soared.
International concerns aside, some powerful entities in Iran are funded by the state but are outside the control of the central bank, or even Rouhani’s government, Rafaty said, limiting the governor’s ability to set policy effectively.
“A scapegoat is needed and who do you go to but the head of the central bank who is apparently responsible,” he said.
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