#20: 24-09-2023

RBI Governor asks global agencies and advanced countries to stop

tagging economies as “currency manipulators”

Synopsis: RBI governor Shaktikanta Das recently called global agencies like the IMF and some advanced
countries to stop listing and tagging countries as currency manipulators. He firmly backed the central
bank’s role to intervene and stabilize markets in cases of extreme volatility.
➢ India was recently on US Treasury’s watchlist as a potential currency manipulator in 2020, with
being removed in 2022.
➢ Western Countries like the US allow the open market to decide the value of their currencies,
whereas countries like India regularly intervene in the markets to stabilize their currencies from
fluctuations.
➢ One of the tools RBI uses to achieve this is buying/selling foreign currency to strengthen/weaken
INR. A weaker INR helps make Indian exports cheaper and thus more attractive. However, this
also makes imports expensive since we now need more INR to buy the same amount of dollars.
Additional Reading 1
Additional Reading 2

Currency manipulation is the practice many countries use to artificially

weaken their currencies. As a currency depreciates against US$, the
purchasing power of the dollar increases and thus it is easier for people
using $ to purchase from that country, thus helping increase exports for
that country. However, now with the stronger US$ any import would be
much more costly making essential goods like oil etc expensive. Thus, any
sudden fluctuations in the exchange rate will impact millions of people in
that country.
#20: 24-09-2023

USA and Qatar agree to block Iran's access to $6 Billion worth of

funds
Synopsis: US and Qatari officials have agreed that Qatar will block Iran’s access to funds to the tune of
$6 Billion which Iran had earned after selling its oil. The disputed money was to be released as part of a
deal that Washington and Tehran had negotiated which involved prisoner exchange in exchange for
releasing the funds. As part of the deal, Iran was only allowed to use these funds for humanitarian work
and access was to be regulated by Qatar, hence they were transferred to a Qatari bank. These funds had
been frozen by South Korea on the USA’s request.

Economic sanctions are penalties the international community levies against the government of a
particular country as punitive measures for breaking international law. They range from travel bans
and export restrictions to asset seizures and total blockades.

How are the USA/western countries able to sanction others effectively? By blocking access to critical
technology, import/export restrictions, cutting off access to the American market etc. Thus, even other
neutral countries usually have to accept and implement these demands against the sanctioned
country.

The USA especially has this extraordinary power because any US dollar flowing through the US financial
system provides a way for the US government to enforce sanctions, failing which companies can face
severe penalties.

Today’s post was compiled by Utsav Shah from BEPCOM