Iran's Forex Plan to Be Unveiled on Monday

EghtesadOnline: First Vice President Es'haq Jahangiri announced that the new foreign exchange plan, which is intended to address the recent volatility in the currency market, has been approved by the High Economic Council and will be formally unveiled on Monday.

News ID: ۷۴۵۷۹۴

05 August 2018

Jahangiri told IRIB news agency that the plan is in line with preparatory measures ahead of the first batch of US sanctions that will target the country's economy on August 6.

He said the details of the plan will be announced by the newly-appointed Central Bank of Iran Governor Abdolnasser Hemmati.

In April, at the outset of the currency market upheavals, Jahangiri had announced other forex measures which, according to most observers, worsened market conditions by choking off free currency trade, according to Financial Tribune.

Later, the government agreed to establish a secondary market where a small portion of non-oil exports could offer their hard currency at negotiated rates to importers.

The new measures are widely believed to expand the Secondary Forex Market and probably allow exchange shops to trade in currencies again.

"The direction of the policies [of the new plan] are such that essential goods needed by the people and society are abundantly provided for and executive bodies will supervise imports and their distribution until the final stage," Jahangiri said.

The government has promised to help importers and specified groups to meet their foreign currency needs.

Jahangiri added that the details of the plan will be discussed and approved in Sunday's Cabinet meeting.

Majlis Conditions

Separately, the chairman of Majlis Economic Commission said on Saturday the parliament has set 12 conditions for the government's new forex plan and will only support it, if these conditions are met.

Mohammad Reza Pour-Ebrahimi also told Mehr News Agency that the government's plan should be able to provide hard currency to meet essential needs and the everyday use of people.

The lawmaker added that a fixed rate currency system has been decried by the Majlis, which only led to an excessive rise in imports, a halt in exports and a stoppage of currency inflow.

Among the parliament's conditions are making a distinction between primary and secondary markets, providing travel currency from the secondary market, offering  petrochemical and steel export revenues in the secondary market, giving official status to currency exchange houses and limiting central bank interventions in open market operations.

Pour-Ebrahimi noted that giving a legal status to cryptocurrencies and reforming banks' balance sheets are among other Majlis conditions.

The government decided to unify the US dollar's exchange rate at 42,000 rials on April 9 in response to volatility that saw the rial sink to all-time lows against the greenback.

At the time, it also banned the physical trade of hard currency by exchange shops and the trading of US dollar at any rate other than the official rate.

Lawmakers were seemingly opposed to official controls and called for cheap currency to be allocated only to essential goods. Under pressure from Majlis and other observers, the government reluctantly agreed to establish the Secondary Forex Market.

The rial has lost half its value against the dollar in just four months, having broken through the 50,000-mark for the first time in March.

The currency collapse intensified after the US announcement in May that it was pulling out of the 2015 nuclear deal, which lifted certain sanctions in exchange for curbs to Iran’s nuclear program.

The US is set to reimpose its full range of sanctions in two stages on August 6 and November 4, forcing many foreign firms to cut off business ties with Iran.