Business-Friendly Forex Overhaul by March

EghtesadOnline: The Central Bank of Iran will conclude the process of overhauling the country's foreign exchange policies and rules by the end of the current Iranian year in March 2018, making them more business-friendly.

News ID: ۷۸۰۰۸۷

28 October 2017

According to CBI’s head of Foreign Exchange Policies and Regulations Department, the new foreign exchange framework has been devised in seven sectors, with some parts of them having changed over the years until CBI’s recently-appointed forex deputy decided to make comprehensive changes.

“Reforming forex policies does not only seek to build defenses against sanctions, but the main goal is to improve the business climate,” Mehdi Kasraei-Pour was also quoted as saying by IRNA.

Improving the nation's business climate has increasingly emerged as a priority across various sectors, especially in light of the World Bank's Doing Business 2017 report that indicated Iran has slightly regressed in improving its entrepreneurial climate following years of lackluster performance, according to Financial Tribune.

According to the report, from a total of 190 countries, Iran ranks 120th in the index for ease of doing business and is placed 16th among 25 countries in the Middle East and North Africa region

According to Kasraei-Pour, since 2002 when forex rate unification was implemented seriously for the first time, it was decided that forex policies be announced as a comprehensive set of regulations so everyone whose business deals with foreign currencies could have easy access to them.

“During the years of sanctions, we stopped revising our foreign exchange regulations and the truth is we are now endeavoring to make up for those years,” he added.

Pace of Change

The central bank has been striving to unify the dual exchange rate regime for years. While it had promised that the official and unofficial rates would be unified by the end of the previous fiscal year in March, the lack of prerequisites such as ties with credible international banks delayed the plan.

Immediately after the administration of President Hassan Rouhani began its second tenure almost a month ago, CBI Governor Valiollah Seif renewed his pledge that "the rates would be unified soon in the new administration".

Kasraei-Pour noted that experts at CBI's Foreign Exchange Policies and Regulations Department are working to update regulations and will ask for the feedback of pundits in the foreign exchange networks of banks before the regulations’ final approval.

According to IRNA, Iran’s foreign exchange regulations have been devised in seven different categories: import of goods and services, transport of goods, insurance and monitoring, foreign exchange services and other international forex deals, foreign exchange loans, letters of credit, foreign exchange transactions of banks located in free trade zones and foreign branches of Iranian banks and the process of assessing foreign exchange commitments arising from imports.

These regulations include a wide range of instructions for importing goods using letters of credits, how to import goods to free FTZs, instructions for settling debts from imports and how to use foreign finances and re-finances.

The department also sets guidelines on how to receive loans from resources like ECO Trade and Development Bank, World Bank or Islamic Development Bank.