Exchange-rate volatility is often described as one of the central challenges facing businesses in Iran. But the problem extends far beyond fluctuations in the value of the Rial. The deeper issue is a currency system shaped by multiple exchange rates, uncertain allocation mechanisms, regulatory complexity, and limited visibility over when, how, and at what cost foreign currency will become available.

In this article, I examine what I describe as “currency friction”: a condition in which monetary and regulatory mechanisms that should facilitate trade instead become constraints on production and business continuity. The discussion explores how FX allocation delays affect raw-material procurement, working capital, supplier relationships, pricing, margins, and ultimately the ability of companies to plan and invest.

Drawing on the evolution of Iran’s exchange-rate regime, recent Purchasing Managers’ Index (PMI) data, and the operational realities faced by manufacturing companies, the article argues that the most damaging consequence of currency instability is not volatility itself, but the erosion of predictability. When companies cannot reliably forecast procurement costs, access to FX, production timelines, or pricing conditions, even short periods of apparent stability can offer little basis for long-term decision-making.

The article also considers how business leaders can respond to this environment, from more resilient supply-chain and budgeting practices to protecting long-term capabilities such as marketing and talent development. It concludes that managing currency risk in Iran increasingly requires more than financial expertise: it demands a sophisticated understanding of political economy, regulation, stakeholder engagement, and Communications & Corporate Affairs.

The full article is available below.