Forex Subsidy Policy for Tourists Facing Revision

EghtesadOnline: Confirming rumors of an imminent change in the Central Bank of Iran’s policy to allocate subsidized currency to outbound tourists, the head of CBI’s Forex Policies & Regulations Department has said the decision on travel currency will be finalized in the next few days.

News ID: ۷۸۳۳۶۸

22 July 2018

“The central bank has made a new proposal to reform the method of travel currency payment, which is being reviewed at the economic headquarters of the government,” Mehdi Kasraei-Pour was also quoted as saying by IBENA.

IRNA, however, quoted Ahmad Asghari, the head of Iran Chamber of Commerce, Industries, Mines and Agriculture’s Tourism Commission, as saying that the central bank has stopped allocating travel currency altogether from July 21.

After unifying the US dollar’s exchange rate at 42,000 rials on April 9, the government set currency allocations for different purposes at the subsidized rate, including for overseas travelers, Financial Tribune reported.

According to the scheme, those travelling to neighboring countries would receive €500 upon departure and those embarking on journeys to far-flung countries would be granted up to €1,000 or an equivalent in other currencies.

As the country faces a shortage of hard currency ahead of the first round of US sanctions which will hit in August, criticism had been directed at the government and the central bank for subsidizing trips to other countries.

The practice had also given rise to rent-seeking behavior by travel agencies that had made profits on the difference between official and open market rates of foreign currencies.

IRNA last week disclosed CBI data that showed a total of $312 million in official foreign currency were allocated to people traveling abroad in the first three months of the Iranian year (started March 21).

Unofficial figures, however, point to higher figures.

A member of Majlis Cultural Commission also on Saturday criticized the allocation of foreign currency to travelers at official rates and said “under the current circumstances, allocation of hard currency is not necessary even for hajj pilgrims.”

Mohammad Esmaeil Saeidi also told ICANA, the parliamentary news website, that “people who travel outside the country are financially strong enough” and have no need for cheap currency.

Mehr News Agency reported on Saturday that one possibility for the central bank is to allow travel currency to be obtained at two rates-the official one and the secondary market one.

The secondary foreign exchange market began working earlier this month, with reports suggesting that the first transaction took place at a negotiated rate almost equivalent to that of the open market rate.

The government decided to unify the US dollar’s exchange rate in response to volatility that saw the rial sink to all-time lows against the greenback.

At the time, it also banned the physical trade of hard currency by exchange shops and the exchange of greenback at any rate other than the official unified rate of 42,000 rials.