Iran's CB Allocates €6.8b for Imports via Secondary Currency Market

EghtesadOnline: The Central Bank of Iran said after the creation of the secondary foreign exchange market – known by its Persian name Nima – in late April, €6.8 billion was sold by it for imports.

News ID: ۷۴۶۳۰۹

08 December 2018

Nima – the Integrated Foreign Exchange Deals System – was set up by the CBI after the government unified the currency rates on April 10 following weeks of volatility and instability in the forex market.

Although at first the Nima rate for one US dollar was fixed at 42,000 rials, huge demand afterwards for the greenback forced the administration to backtrack on its forex rate unification policy and let "supply and demand" set the rates.

Exporters now complain that the rates in Nima is manipulated by the central bank and as such underpins  unfair government rules that demand export earnings be sold at the platform. The CBI in turn argues that the same exporters who are protesting also use Nima for their own currency needs, Financial Tribune reported.

According to the CBI, electronic and radio devices have topped currency allocation via Nima at € 1.3 billion, followed by machinery equipment and car parts at €1.2 billion. Other high-demand goods included tires and chemicals (€1.132 billion)and transportation equipment (€677 million).

Last week, Mehdi Kasraee Pour the head of CBI Forex Policies and Regulations said that out of €21.4 billion export earnings during the eight months to November 21, only €5.7 billon had been sold to Nima.

In late November the central bank communicated details of the new currency repatriation rules according to which earnings of up to €1 million are exempt from selling through Nima.

In an instagram post on Friday, CBI boss Abdolnasser Hemmati said now that 'new payment channels" for Iran oil payments are becoming available, currency for imports will be will be allocated "rapidly."

India Rupee Mechanism

One oil industry source involved in discussions told Reuters on Thursday that India will import crude oil from Iran using a rupee-based payment mechanism,  adding that 50% of those payments will be used for exporting goods to Iran.

India’s state-owned UCO Bank is expected to announce the payment mechanism in the next 10 days, the source said.

“An agreement was been signed by the Indian and Iranian government on Nov. 2 for oil payment in rupees and 50% of those funds had been earmarked for exports,” according to an Indian government document seen by Reuters.

Hemmati hailed the "relative stability" in the forex market, which he said has emerged alongside CBI's efforts to strengthen the national currency.

"Therefore now is the time to focus on domestic production and economic growth," the senior banker  wrote.

The US dollar traded at 117,000 rials on Thursday, a price range at which the greenback is being traded for the past two weeks.