Iran's Forex Subsidy Policy Unaltered

EghtesadOnline: The government will not change its current policy to subsidize imported essential goods and food up until next March, the government spokesman said.

News ID: ۷۴۷۶۲۳

22 June 2019

“There won’t be any change in the forex rates and the government policy is to allocate [subsidized] currency until the end of this fiscal year,” Ali Rabi’e wrote in a Tweeter post on Wednesday.

He rejected “rumors” about scrapping cheap currency for importing food and other essential goods, saying such speculations only help add to chaos and volatilities in the currency market.

Amir Baqeri, an official with the High Council of Economic Coordination, said Tuesday that the government would announce the end of its controversial forex subsidy policy on June 19, Financial Tribune reported.

Baqeri, however, did say that the government is more likely to continue the existing policy of subsidizing basic goods with some tweaks in the number of items eligible for cheap currency for imports.

The government decision to retain the controversial policy comes amid rising criticism from many quarters over the fact that it has failed to support the low income strata and indirectly served the interest of avaricious middlemen and rent-seekers.

In addition, it has been said that due to faults with the distribution system and absence of efficient government oversight, the real consumers of essential goods ultimately buy goods at open market rates despite the fact that those goods have been imported at highly subsidized forex rates.

A subsidized US dollar costs 42,000 rials and sells for 134,000 rials in the open market.

The government paid $14 billion in subsidized currency for importing essential goods in the last fiscal year and plans to allocate another $14 billion in the current year.

Out of $14 billion paid in subsidies for importing essential goods in the last fiscal year (March 2018-19) $3 billion was for pharmaceuticals and $8.3 billion for consumable goods, namely food.

In an Instagram post on Friday, the governor of the Central Bank of Iran Abdolnasser Hemmati said the bank had allotted $5 billion for importing essential goods in the past three months.

Apart from that, Hemmati said $6 billion had been sourced from non-oil export earnings that were repatriated to the country.

The mounting criticism convinced parliament in February to reject the forex policy as is currently being implemented. Lawmakers made it mandatory for the government to revise its inefficient and dysfunctional subsidized currency policy.