Iran's Central Bank Urges Exporters to Return Currency Earnings

EghtesadOnline: In its latest directive, the Central Bank of Iran, on Tuesday urged exporters to return their export earnings to "the country's economic cycle'' as their three-month deadline comes to an end.

News ID: ۷۴۶۴۰۶

02 January 2019

The CBI had initially demanded that exporters bring their overseas earnings to the country on September 11 after the measure was approved by the High Economic Coordination Council of the Heads of Three Branches of Government (an ad-hoc body convened at the behest of Leader Ayatollah Seyyed Ali Khamenei to fast-track economic decisions).

Under pressure from private companies and lawmakers, the CBI made some changes to its earlier directive on November 19, making an exemption for export earnings of up to €1 million from being sold on Nima (an online supervised forex platform created by the CBI for forex transactions.)

Exporters say that they do not have any objection to repatriating their currency earnings, but complain that the time limits and the compulsion to sell the currency via Nima (whose rates are much lower than in the open market) is a spanner in their works, according to Financial Tribune.

Businesses also complain about the speed at which the CBI has issued directives and regulations after it scrambled to stabilize the volatile forex market by imposing a fixed rate of 42,000 rials to the USD on April 10. (The government scrapped the decision barely three months later admitting that it was a mistake.)

Exporters say from April 10, as many as 37 directives have been issued by the CBI, most contradicting each other, which has undermined the morale and stability of the businesses and made long-term planning extremely difficult (some say impossible).

Tuesday's directive carried an implicit threat as it warned exporters that if they fail to return their earnings to the country, the CBI will be "obliged to take necessary legal measures."

The latest coercion comes as CBI officials including Mehdi Kasraei Pour, the head of the bank's forex policy and regulations had insisted earlier that the rules, which are dubbed by exporters as "forex pledging", are merely a commitment on the part of exporters to bring back home their overseas earnings.

Iran’s economy has struggled since US President Donald Trump pulled out of the 2015 nuclear accord in May and re-imposed sanctions, including restrictions on oil exports. The rial, the national currency, has depreciated by more than 50% this year while year-on-year prices of consumer goods have increased by more than 60%, the CBI says.

Year-on-year inflation rate which was 39.9% by November 22, is predicted to keep growing. However, the CBI has not released the inflation rates for the Iranian month to December 22, citing differences with the Statistical Center of Iran, which is officially responsible for announcing inflation trends.

Business Grievances

The issue of currency repatriation was on top of agenda during the latest round of Public-Private Dialogue (a periodical meeting between private company representatives and government officials) late on Monday.

The meeting was presided by Economy Minister Farhad Dejpasand who found himself at the receiving end of grievances of exporters who expressed serious concern that with the current crop of currency repatriation rules, non-oil exports will take a serious hit in the not too distant future.

President of the Iran Chamber of Commerce, Industries, Mines and Agriculture, Gholamhossein Shafei, cautioned the minister that tough demands on exporters could eventually force out credible and prominent businesses while opening the way for recruits, nonprofessionals and avaricious middlemen who hardly care for or play by the rules.

Another notable business figure sounded the alarm that while other countries like Turkey and Malaysia are reporting high and rising export revenue, policymakers in Tehran are busy creating new hurdles for exporters and passing cumbersome rules that have one outcome: make a bad situation worse.

Agreeing in principle to demands of exporters, Dejpasand (a minister who says interaction with private enterprise is his priority), complained that exporters had barely sold 25% of the $33 billion in export earnings on Nima in eight months to November 22.

Exporters argue that the facts and figures released by the customs authority regarding export value and volume are inflated and open to question.

As a solution, the minister proposed formation of a special committee comprising representatives from ICCIMA, the government and CBI to pool minds and come up with a new and workable mechanism for export currency repatriation.