Deputy Economy Minister Defends Gov’t Forex Policy

EghtesadOnline: The government’s policy to allocate dollars and euros to companies at a fixed rate of exchange was the best policy, a deputy minister of economic and finance affairs said.

News ID: ۷۸۳۳۵۷

21 July 2018

Hossein Mir-Shojaeian added that with the value of foreign currencies fluctuating against the rial, the inflation rate was bound to soar.

Following the turmoil in forex market and the decision of US President Donald Trump’s administration in May to withdraw from the nuclear deal and reimpose sanctions against Iran as of August, the Iranian government set a fixed rate of exchange for the dollar at 42,000 rials, almost half the estimated value in the black market. It then amended the policy by forming a “Secondary Forex Market” wherein the rate could be decided through negotiations between the buyer and the seller.

The 42,000-rial dollar was allocated to certain persons, mainly legal, in order for them to import essential goods. The move resulted in several instances of misuse and corruption though, Financial Tribune reported.

Speaking in a press conference on Tuesday to discuss future inflation rates considering the changes in the forex market, Mir-Shojaeian said that of the two options available to the government, the other being allowing the market to set the value of the US dollar and take on the responsibility of procuring essential goods, it made the right choice in deploying command economy policies, although it had not anticipated corruption and amended the policies to prevent further profiteering down the road, IRNA reported.

According to the Central Bank of Iran’s latest report, the average goods and services Consumer Price Index for urban areas in the 12 months ending June 21, which marks the end of the Iranian month of Khordad, increased by 9.4% compared with last year’s corresponding period.

CBI had put the inflation rate for the preceding month of Ordibehesht, which ended on May 21, at 9.1%. The overall CPI (using the Iranian year to March 2017 as the base year) stood at 122.6 in Khordad, indicating a 4.3% increase compared with the previous month. The index registered a year-on-year increase of 13.7% compared with the similar month of last year.

The CBI report came after the Statistical Center of Iran put Khordad inflation at 8.2%.