Majlis Plans Probe Into Forex Subsidies

EghtesadOnline: The parliament plans to investigate the foreign exchange policy of the Central Bank of Iran during the last fiscal year that ended in March, says head of the Majlis Economic Commission.

News ID: ۷۴۷۴۶۲

01 June 2019

Mohammadreza Pourebrahimi spoke of $3.5 billion worth of subsidized currency allocated for importing essential goods last year, saying it is not clear whether the currency was used for import or for other purposes, Mehr News Agency quoted him as saying.

The lawmaker opined that there are rent-seekers who receive subsidized forex for imports and sell it at higher prices (almost three times) in the open market.

A subsidized USD costs 42,000 rials while the green back is sold for 135,000 rials in open (black) market, according to Financial Tribune.

Pourebrahimi labeled the planned probe as “the black box of the economy,” adding that allocation of subsidized forex in its current manner is a wrong policy of government that has resulted in the flood of imported goods into the country.

Due to the unending volatility in the currency market that sent the rial to unprecedented lows from last year, the government in the April of last year set a mandatory rate for all currency trade to stabilize the market.

The measure flopped and the government panicked. Later it decided to strictly limit allocation of currency at official rates only to selected foods and drugs. That again created a big gap between rates in the open market and those fixed by the CBI.

Deep Ambiguities

Among other things, chaos in the distribution of basic goods among the people, the potential for rent-seeking and corruption, and inability of the state to support the poor and needy is often referred to by economists and observers as some of the abject failures of the government’s ill-fated subsidized forex policy.

Pourebrahimi says reports show deep ambiguities in terms of companies eligible for cheap currency, the food distribution networks and the prices end consumers pay for goods ostensibly imported with subsidized currency.

“It should be clarified in unambiguous terms who receive subsidized currency, who use the currency for importing goods and what happens to the imported goods,” he said.

The parliamentary probe will seek to shed light on the performance of the ministries of Industry, health (with regard to importing pharmaceuticals and medical equipment), and agriculture (importing essentials goods, namely agro products), and the Trade Promotion Organization.

A probe proposal will be put to a vote in the commission in the coming days and after approval will be sent to the chamber for final approval.

“After the investigation is complete the government and the judiciary will be obliged to exercise punitive measures against those who failed to fulfill their commitments”, the senior MP was quoted as saying.

According to available data, out of $14 billion paid in subsidies for importing essential goods, $3 billion was for pharmaceuticals and $8.3 billion for consumable goods, namely food.

It merits mention that in the current fiscal budget, the parliament has made it mandatory for the government to revise its inefficient and dysfunctional subsidized currency policy.