Central Bank of Iran Censured Over Policy Inconsistency

EghtesadOnline: Members of Tehran Chamber of Commerce, Industries, Mines and Agriculture’s Board of Representatives convened on Tuesday to discuss the latest status of the economy, particularly the anguish caused by the recent currency crisis.

News ID: ۷۸۳۹۸۹

12 September 2018

Officials of the Central Bank of Iran, Industries Ministry and the Islamic Republic of Iran Customs Administration attended the meeting.

Masoud Khansari, TCCIM’s president, expressed concerns over ad hoc policy changes and the barrage of directives that have been devised since the government first responded to rial’s steep depreciation against the US dollar on April 10.

“From April 10 until August 13, CBI has issued more than 33 directives and according to the IRICA chief, it had to notify more than 150 ordinances in accordance with the forex injunctions,” he said, referring to the many regulations CBI introduced since it unified the US dollar’s exchange rate before altering some and nullifying others, Financial Tribune reported.

Khansari referred to the government decision to charge importers for the exchange rate difference after it decided to scupper the allocation of cheap currency for some goods.

The fact that some of these importers had counted on the government’s word and were enraged, some of whom refused to pay the rate difference necessary for customs clearance of their goods.

Although the government has since made exceptions for importers of some raw materials and machineries, Khansari described the decision as “dishonorable”.

“Due to these policy changes, including imposing bans on some goods that had already been imported, currently 139,000 containers are held up at the customs across the country. Some of the importers refuse to take delivery of their goods for fear of being named and shamed as hoarders, if they were to stock the products,” he said.

Other TCCIM representatives also complained about the red tape involved in obtaining hard currency from the online forex dealings system known as Nima.

CBI on August 6 eased foreign exchange rules and allowed moneychangers to resume work at free market rates as part of the latest rescue package intended to calm the markets.

The fresh strategy came after the government decided to unify the US dollar’s exchange rate at 42,000 rials on April 9 in response to the rial’s freefall.

At the time, it also banned the physical trade of hard currency by exchange shops and the trading of US dollar at any rate other than the official rate.

Official Response

Gholamreza Panahi, CBI’s deputy for foreign exchange affairs, said the country needs to manage currency demand in line with the amount of hard currency it has at its disposal.

Panahi said the secondary market–the venue where exporters and importers trade in hard currency at negotiated rates–is accepted by the private sector and has in fact motivated exporters to offer their hard currency.

He added that since only 3% of the currency trade are in the form of physical banknotes, the rally in exchange rates–at 140,000 rials on Tuesday–cannot be relied on.

According to the official, with an average exchange rate of 90,000 rials, the secondary market was a far more credible barometer for real exchange rates.

Hearing business people’s gripes about the currency repatriation rules, Panahi said a new directive would be announced in this regard, taking into account the private sector’s views.

The Central Bank of Iran notified a directive on Monday, elaborating on rules based on which exporters are required to bring back their export earnings into the “economic cycle” of the country.

The directive has six articles and gives exporters three months to declare 95% of their hard currency from the time their customs export license has been issued, CBI’s website reported.

Exporters can keep the remaining 5% for such costs as marketing, advertisement and overseas office expenses.

Deputy Minister of Industries, Mining and Trade Mojtaba Khosrotaj also addressed the gathering and asked TCCIM to hold conferences and debates to weigh the pros and cons of the government’s forex policies as well as the true causes of the currency volatility, and submit the findings to the government.