Iran’s Banking System Is Running Dry – And the Regime Is Pretending Otherwise

Iran’s Central Bank last week conducted a market operation that resulted in the injection of exactly zero tomans into the banking system – maintaining a ceiling of 70 trillion tomans while banks submitted demands exceeding 400 billion tomans ^[1]. That is not a policy choice dressed up as stability. It is a controlled suffocation, and it is playing out most visibly in places like Zabol, where the informal economy has long been the only economy that actually functions.

The liquidity crisis did not arrive suddenly. By mid-August, the National Bank of Iran was already reporting that 88% of banks’ requests for funds were being rejected, with demand rising by over 130 billion tomans in a single week ^[2]. The week before that, the Central Bank’s market operation had declined from 70 to 60 billion tomans in coverage – less than 20% of what banks were actually requesting ^[2]. The direction was clear then. What changed by early September is that the pretense of management has become harder to maintain.

Central Bank governor Abdolnaser Hometi offered the official framing on September 6: the bank ‘will intervene in the market using its currency resources and tools as needed,’ and this is being done under ‘wartime conditions’ ^[3]. The wartime framing is deliberate. It allows the regime to cast economic dysfunction as a patriotic sacrifice rather than a governance failure – a rhetorical move that has been used with diminishing returns since at least the reimposition of U.S. sanctions. But the rial’s trajectory tells a different story. The currency has collapsed from 194,000 tomans per dollar ^[4] to 206,000 ^[5] to 223,000 ^[3] in the space of months, with the black market rate running well above the exchange rate center’s official figure of 160,502 tomans – a number that Iranians engaged in any real commerce have learned to ignore entirely.

What makes the September 6 zero-injection announcement significant is not the number itself but what it reveals about the Central Bank’s strategic calculus. The bank is simultaneously withholding liquidity from a system that is screaming for it, issuing gold coin certificates to manage excess cash in the economy ^[6], and launching ‘standardized parallel bullion notes’ on the commodity exchange ^[7] – instruments designed to absorb savings and reduce pressure on the currency without actually addressing the underlying shortage of hard currency. This is monetary triage, not monetary policy. The Central Bank is managing symptoms while the wound deepens.

The oil revenue picture adds another layer of contradiction. A Central Bank spokesperson announced on September 6 that oil revenues received this year have increased by 50% compared to the previous year, ‘despite various limitations’ ^[5]. The deputy director had made a similar claim days earlier, clarifying that export restrictions do not halt the receipt of proceeds from previous sales ^[8]. Both statements are technically defensible and politically convenient. What they do not explain is why, if oil revenues are genuinely up 50%, banks are being denied the liquidity they need to function. The answer almost certainly lies in the gap between revenues received and revenues accessible – a distinction that sanctions architecture has made brutally relevant. Money that cannot move through correspondent banking relationships is money that cannot reach the domestic banking system in any useful form.

The Iran Zamin bank case, reported on September 6, illustrates the depth of the structural problem ^[4]. The bank announced the ‘revival of its operations’ – a phrase that itself signals how far things had deteriorated – with 75 million tomans transferred from its assets to the Central Bank as part of debt settlement. A bank settling debts with the central bank as a condition of revival is not a sign of systemic health. It is a sign that the cleanup of zombie financial institutions is ongoing, quiet, and almost certainly incomplete.

In Zabol, the effects of this systemic dysfunction land differently than they do in Tehran. Zabol sits in Sistan-Baluchestan, Iran’s poorest province, where cross-border informal trade with Afghanistan and Pakistan has historically served as a survival mechanism for communities that the formal economy never reached. The crackdown on informal trade networks in the region is not new, but it has intensified as the regime faces a dual pressure: the need to control foreign exchange flows that bypass the Central Bank, and the ideological imperative – articulated by figures including the first vice president and the Tehran Prosecutor – to frame informal commerce as a moral failing rather than a rational response to state failure. Calling it an ‘economic war’ against foreign-backed saboteurs is easier than explaining why minimum wages have fallen below $60 per month.

The poultry market offers an accidental window into how distorted supply chains have become. Chicken prices dropped from nearly 400,000 tomans per kilogram to 270,000 tomans ^[9], with the Ministry of Agriculture acknowledging that chicken is now selling below production cost and pledging support for producers ^[9]. This is not a success story. A price collapse in a basic protein staple, occurring simultaneously with a currency collapse, points to demand destruction – people buying less because they can afford less – rather than any genuine improvement in supply. The ministry’s plan to collect surplus chicken and continue exports ^[9] suggests the government is more concerned with managing optics than with the underlying purchasing power crisis.

The gold certificate initiative deserves particular attention as a window into factional economic thinking. The Central Bank’s issuance of gold coin certificates ^[6] and the launch of parallel bullion notes ^[7] follow a logic that has been debated inside the regime for years: if you cannot stabilize the rial, channel savings into instruments that track gold, thereby reducing speculative pressure on the exchange rate without requiring hard currency reserves you do not have. This approach has pragmatist fingerprints on it – it is the kind of technocratic workaround that reformist-adjacent economists have long advocated as a harm-reduction measure within the constraints of sanctions. Whether the hardliner-dominated security establishment will allow it to function without interference is a different question.

The Central Bank’s simultaneous actions – penalizing banks for money laundering violations ^[10], issuing gold instruments, withholding liquidity injections, and claiming oil revenue growth – reflect an institution trying to perform competence across multiple audiences at once. For the domestic public, it projects control. For the FATF and international observers, it performs compliance. For the regime’s political patrons, it signals that the economic war narrative is being operationalized. None of these performances are fully compatible with each other, and the rial’s continued slide suggests the market is not convinced by any of them.

The regime’s stability calculus here is grimmer than the official rhetoric suggests. A zero-injection week is not a crisis in isolation. But it arrives at a moment when the banking system’s credibility is already compromised, when the rial has lost roughly a third of its value against the dollar in a matter of months ^[5][4][3], and when the informal economy – the very networks being cracked down upon in Zabol and elsewhere – remains the primary buffer between millions of Iranians and destitution. The crackdown is not eliminating those networks. It is driving them deeper underground, reducing their visibility to the state, and increasing the cost of participation in ways that fall hardest on the poorest participants. Zabol is not an exception to Iran’s economic story. It is where that story becomes impossible to narrate away.