Imports of Essential Goods at Subsidized Rates on Decline

EghtesadOnline: The import of all necessity goods, except corn, has declined this year compared with last year, Domestic Commerce Commission of Iran Chamber of Commerce, Industries, Mines and Agriculture reported, citing figures released by the Central Bank of Iran.

News ID: ۷۵۱۷۶۸

03 January 2021

Over the nine months to Dec. 20, CBI paid $4.42 billion at the exchange rate of 42,000 rials per US dollar for the procurement of essential goods, registering a 41% decline compared with the corresponding period of last year, Ashraf Mortezaei, an official with the commission, said.

“Order registration for essential goods imports stood at $12.24 billion during the nine-month period, posting a 17% year-on-year decline. Since the beginning of the Iranian year (March 20) to Dec. 20, a total of $9.25 billion have been allocated to essential goods, which is $500 million less than last year’s similar period,” she said.

“The value of essential goods cleared [from customs] stood at $6.23 billion in the nine months to Dec. 20, indicating a 30% drop compared with $8.9 billion in last year’s same period.”

On the five essential goods with the highest impact on households’ livelihoods, namely corn, soybean meal, unprocessed oil, oilseeds and barley, Mortezaei said these items accounted for half the subsidized currency allocated for importing essential goods during the period, which shows a 5% decline YOY.

“The government planned to allocate $6.4 billion to import these five items during the fiscal 2020-21. By Dec. 20, a total of $4.75 billion were earmarked and $4.3 billion were paid, which show that the government has to pay the remaining sum of $2.1 billion by March 20, 2021,” Otaghiranonline.ir quoted her as saying.

According to the official, over $3.08 billion were provided for importing corn, soybean meal and barley in the nine-month period, showing a 14% YOY decline.

“Prices of raw oil and oilseeds and, accordingly, vegetable oils saw a 15-25% growth in the current year. Over the last nine months, 702,000 tons of unprocessed oil worth $559 million were discharged from customs. Imports of oilseeds stood at 1.7 million tons worth $807 million, indicating a 15% rise in weight but a 7% decline in value YOY. Totally, the custom clearance of oilseeds and unprocessed oil imports indicates a decline of 22% in weight and 7% in value YOY,” she said.

According to members of ICCIMA’s Domestic Commerce Commission, challenges facing the supply of essential goods in the next fiscal year (March 2021-22) include misguided policies regarding market regulation, hurdles in the way of foreign exchange allocation and transfer, lack of transparency about the country’s strategic reserves, inflation, decline in demand due to people’s declining purchasing power and production problems.

As per the budget bill for the next fiscal year (March 2021-22), the government will provide $8 billion for the supply of essential goods. But the correlation between the sum of allocated forex and the exchange rate has not been specified and the budget fails to indicate how long the government would retain the cheap import policy.

On the other hand, there is not enough transparency regarding subsidized forex allocation and pricing. The level of essential goods reserves by March 20, 2021, and the next year has not been specified. Furthermore, the government’s policies to promote the economic wellbeing of households are ambiguous.

Kaveh Zargaran, the chairman of the commission and secretary of the Federation of Iranian Food Associations, believes that the government is likely to rid itself of subsidized import policy completely by the end of the current fiscal year (March 20), in view of the Minister of Industries, Mining and Trade Alireza Razm-Hosseini’s approach.

“As a result, prices will increase to some extent and demand will decline and a relative recession will result. Food and related industries are likely to experience a relative recession by the end of the year and the beginning of new Iranian year,” he said.

“The flow of imports has all been stopped by the importers of raw materials and essential goods who are unwilling to take risks, given the pressure of sanctions and the state of the government’s budget and the central bank,” he said.

“As the representatives of producers and economic operators, the Ministry of Industries, Mining and Trade is seeking a unified foreign exchange rate. Today, we expect the parliament to take a revolutionary decision in this regard,” the industries minister said recently.