Iran Gov’t Reviving ‘Import Without Forex’ Policy

EghtesadOnline: Following reports that the Central Bank of Iran has allowed companies to import goods “without transferring foreign currency”, the CBI outlined conditions for doing so.

News ID: ۷۵۰۰۶۲

18 May 2020

The so-called import without forex allocation refers to a method of import where companies can use their own foreign currency, in or outside the country, for imports.

In a notice on its website, the CBI said it welcomes the method on the condition that importers determine the origin of their foreign currency holdings.

According to media reports, the same method was common in the recent past for importing goods for which the government was unable or unwilling to open letter of credit.

However, the CBI imposed restrictions on this import practice reportedly due to transparency issues.

To improve transparency in export-import operation and monitor forex allocation for imports, the regulator introduced an electronic platform and obliged importers to declare the amount of currency needed for a particular good plus details regarding origin, volume and brand name.

The return of the method was first announced by Hossein Modares Khiabani, caretaker of Industries Ministry late on Saturday.

He said the CBI has given the go-ahead to firms to import raw material without applying for forex from the regulator.

This came on the heels of a new CBI directive that allows companies to use their own foreign currency for import, according to ILNA.

Following mounting pressure on the treasury, the CBI has informed companies that it will soon stop supplying foreign currency for a number of goods through the secondary currency market (known as Nima), and henceforth they should use their own forex for bringing foreign goods.

No details were provided, but business leaders in recent months have been quoted as saying that the CBI has already stopped allocating subsidized forex for importing some basic goods like rice and sugar.

Nima is an online platform affiliated to the CBI where exporters sell their overseas currency income and companies buy it for importing goods, machinery, equipment and raw materials.

Elaborating on the provisions of the new directive on its website, the CBI said importers have used forex whose origins were explicit and transparent, adding that they need to declare the origin of the foreign currency to be able to import.

“Two years ago and due to limitations imposed by the sanctions, the CBI introduced clear procedures for offering currency [income] from export revenue,” it said.

As part of the procedures, exporters must sell part of their proceeds via Nima. They can also use part of their overseas earnings to import raw material for their own company or that of a third party in Iran.

The regulator reiterated that it will welcome importers using this method “on the condition that input and output of the said currencies is unambiguous and transparent.”

The CBI underscored the critical need for transparency, saying that “transparency is the key factor in boosting domestic production.”

Skirting Sanctions

Importers criticize the CBI’s insistence on clarifying the source of currency used for import, claiming that such restrictions obstruct the need for bypassing unilateral US sanctions.

“Importing goods without announcing the origin of the foreign currency helps skirt the sanctions as it allows deals in currency directly by the people and toward the economic cycle,” said Arash Mohebinejad, secretary of the Specialized Manufactures of Auto Part Association told  IRNA.

“The CBI has always insisted on knowing the origin of forex used for import. This indeed makes dodging sanctions difficult as the origin of the money would also be exposed the sanctioning party,” he said, referring to the belligerent United States under Donald Trump.

Recalling that the country is facing a foreign currency crunch, Mohebinejad said the CBI has not allocated a dime in foreign currency to spare part manufacturers in the current fiscal year that started in March.

Alireza Monaqebi, an importer, underscored the need to resume “import without currency allocation” especially at a time when Iran’s foreign trade is saddled with a whole lot of difficulties, the US sanctions in particular.

“Only the private sector can circumvent the sanctions. The country needs raw material and machinery for production,” he told ILNA, echoing the complaints of large numbers of manufacturing companies stuck with import problems and facing insolvency.