Central Bank of Iran: Currency Inflow Growing Steadily

EghtesadOnline: Governor of the Central Bank of Iran said on Saturday that since his bank allowed the import of hard currency by money exchange houses and other legal and natural persons, the inflow has been growing steadily.

News ID: ۷۴۶۰۳۷

23 September 2018

Abdolnasser Hemmati added that CBI is also keeping a watch on the market and will inject its own hard currency in case of a shortfall, the state TV reported on its news website.

“CBI officials have good coordination with the Association of Bureaux de Change Operators of Iran and they plan to facilitate hard currency trade in exchange houses,” he said.

On August 6, CBI eased forex rules and allowed exchange houses to resume work at open market rates as part of its latest rescue package intended to calm the volatile market, according to Financial Tribune.

The policy was a complete reversal from the policy adopted in April, which regarded any currency trade outside the banking system as smuggling. The government also fixed the US dollar’s exchange rate at 42,000 rials at the time and said any currency demand would be met at that rate.

However, faced with unreasonable demand for imports at the cheap currency rate, the government decided to shorten the list of products entitled to receive the official currency and limited that category to “basic and essential goods.”

Another contentious practice that ended with the new policies was the allocation of such currency to overseas travelers which, considering the wide gap between the official and market rates, significantly subsidized foreign trips for holidaymakers.

However, CBI now allows the import of currency and gold into the country by all individuals as a means to stabilize the two markets that have been particularly volatile for the past six months.

Last summer, a dollar fetched about 38,000 rials on the open market. Since then, the rial has lost more than 60% of its value. Last month, it bottomed out at close to 150,000 rials to the dollar, a record low but has since pared some of its losses.

On Saturday, the dollar was reportedly traded for 144,700 rials on the open market but on the website Sanarate.ir, which records the average rate traded across exchange shops, the US dollar fetched 117,490 rials.  The euro was traded for 119,480 rials.

The benchmark Bahar Azadi gold coin was traded for 45 million rials ($383), according to Tehran Gold and Jewelry Union’s website.

The volatility in the currency and gold coin markets further intensified after US President Donald Trump announced in May that he is pulling his country out of the multilateral nuclear deal Iran signed with world powers in 2015.

Last month, Washington reimposed sanctions on Iran’s purchase of US dollars and its trade in gold, precious metals, coal and industrial software.

Export Revenues

Hemmati announced that non-oil export revenues during the five months to Aug. 22 totaled more that $19 billion. He said the export of gas and oil products included in non-oil exports had generated $3 billion and the remaining $16 billion will return to the “economic cycle”.

He added that since the implementation of new forex policies up until now, roughly €2 billion have been offered on the Secondary Forex Market through the online forex deals system Nima.

The secondary market was established by CBI for exporters to offer their hard currency to importers at negotiated rates.

The CBI chief said over 80% of the currency offered on Nima have come from petrochemical firms with the remaining non-oil exporters accounting for less that 20% of the injected currency.

Hemmati called on other non-oil exporters to offer their hard currency earnings on the secondary market, saying it was a “national request”.  He added that CBI allocated $13 billion for essential goods, medicine and medical equipment.

Some non-oil exporters, including petrochemical firms owned by the government or semi-state entities, have been accused of withholding their hard currency earnings from the secondary market or delaying it enough  for exchange rates to climb further.

In a speech this month, President Hassan Rouhani harshly criticized the practice that he called “treason”.

Ali Shams Ardekani, president of Energy Commission at Iran Chamber of Commerce, Industries, Mines and Agriculture, was quoted as saying by ICCIMA’s website on Saturday that the main reason for the disruption of currency inflow by petrochemical firms was the US secondary sanctions making banking transactions difficult for Iranian exporters.