10 Pahlavī (Pahlavi Rule) – Iran

In 1976, Iran's currency situation was characterized by an artificial strength buoyed by the peak of the Pahlavi monarchy's oil-fueled economic ambitions. The Iranian Rial was officially pegged to the U.S. dollar at a fixed rate of approximately 70.5 Rials per dollar, a rate maintained by the Central Bank through substantial foreign exchange reserves. These reserves, swollen by the quadrupling of oil prices following the 1973 oil embargo, created an illusion of profound stability and purchasing power. The strong Rial facilitated a surge in imports of luxury goods, military hardware, and technology for the Shah's ambitious modernization projects, contributing to a facade of a prosperous, rapidly westernizing nation.

Beneath this surface, however, significant structural weaknesses were festering. The economy was dangerously over-reliant on oil revenues, which financed grandiose state-led industrialization while other sectors, particularly agriculture, stagnated. This led to high inflation, estimated at around 25% annually, which the fixed exchange rate helped to mask but could not eliminate. The strong Rial also made non-oil exports uncompetitive, hurting domestic industries and fostering a growing dependence on imported goods and foodstuffs. Furthermore, massive government spending fueled by petrodollars created overheating and bottlenecks, while wealth inequality and rural-to-urban migration generated social tensions.

Consequently, the currency stability of 1976 was precarious, existing in a bubble sustained by volatile oil markets and authoritarian control. It was not reflective of a diversified, productive economy but was instead a monetary manifestation of the regime's centralized power and its vulnerability to external shocks. Within two years, this facade would collapse under the weight of falling oil revenues, political upheaval, and the chaos of the Islamic Revolution, leading to a dramatic devaluation and the end of the fixed exchange rate regime.