Pundits Welcome Travel Currency Elimination

EghtesadOnline: Reactions to the Central Bank of Iran’s latest directive that effectively eliminates the allocation of subsidized foreign currency to travelers and paves the way for forex rate unification have been largely positive.

News ID: ۷۷۹۲۱۸

17 September 2017

“CBI’s move to remove travel currency was an effective measure that should have been undertaken sooner because providing currency for [outbound] tourists was not justified and only served the tourism sectors of other countries,” a member of Tehran Chamber of Commerce, Industries, Mines and Agriculture’s board of directors, Abbas Argon, told IRNA.

Less than two weeks ago, the central bank issued a directive decreeing that as of September 11, the scheme allocating $300 to travelers at official rates that are about 600 rials lower for each dollar compared to open market rates will be abolished.

Argon noted that this measure can be a step toward the unification of the dual foreign exchange rates, adding that while paying foreign currency for medical and business purposes is a different matter, the elimination of official forex rates will gradually shorten the gap between the two rates and reduce rent-seeking behavior, Financiasl Tribune reported.

“At present, a number of goods are prioritized but they will soon be taken out of the equation as well, meaning that less forex will be paid to them,” he added.

On whether taking official currency away from businessmen would be detrimental to them, the private sector official said “they will learn to adapt” and the measure will enhance transparency.

Seyyed Kamal Seyyed Ali, CBI’s former deputy for foreign exchange affairs who currently heads the Export Guarantee Fund of Iran, has also welcomed the gradual elimination of all foreign currencies offered at official rates, including for travel purposes.

“Ending the allocation of official forex rates will entail transparency and better pricing,” he said, adding that studies show goods imported at official rates do not ultimately differ from similar goods imported at market rates, in that they do not benefit the consumer.

Saeed Mojtahedi, the head of the Association of Bureaux de Change Operators of Iran, believes that because the cap for travel currency at $300 was already low enough and because of the paperwork involved, “removing it has not created much change in the market”.

“Many travelers did not even buy that currency at banks, so eliminating it will not have an impact on the market,” he added.

Mohammad Lahouti, the head of Iran Export Confederation, has also welcomed the measure, calling it a “prelude to unifying the forex rates”.

He noted that while the cap was not very high, it is significant considering the nine million travelers who go overseas each year.

The removal of travel currency at official rates “supports attraction of tourists and creates money within the economy” instead of letting foreign currency leave the country and paying a subsidy for Iranian travelers to spend in other countries, Lahouti declared.