Banks Notified to Adjust Forex Rates in Financial Reporting

EghtesadOnline: New exchange rates should be used by banks as the basis for converting their forex debt and assets into rial, the Central Bank of Iran said Thursday.

News ID: ۷۵۱۲۲۵

10 October 2020

As per a CBI bylaw, each euro will be equal to 129,000 rials and the US dollar will be worth 110,000 rials (or equivalent in other currencies).

As a matter of policy, the CBI regularly updates parity rates with the national currency to be used by lenders as the basis for preparing their financial statements.  The latest conversion will guide lenders to draft, or revise, their mid-term financial statements ending on Sept. 21.

The CBI said it will again update the forex conversation rates before the new fiscal year is out next March.

Adjusting the conversion rates have been announced despite the fact that currency prices in essence are way higher, raising new criticism that a devalued forex rate in banks’ balance sheets would have a negative impact on the economy already limping under the weight of hostile US sanctions and the coronavirus pandemic.

Hossein Selahvarzi, vice president of Iran Chamber of Commerce, Industries, Mines and Agriculture, in a tweet asked the CBI to clarify on what basis it has made the decision.

The announcement came amid steep volatility in the chaotic currency market. A combination of chronic forex shortages for trade, uncertainty over the future of the FX market and the unending demand for currency from the people has pushed forex rates to historic highs.

On Thursday the dollar was quoted at 298,000 rials in the open market while economic experts and monetary analysts say the worst is yet to come.