Economists, Central Bank of Iran Discuss Roadmap

EghtesadOnline: Economic experts have commended the monetary and banking measures taken by the Central Bank of Iran to augment transparency and stability in the foreign exchange market, emphasizing that such measures should continue along with other supplemental policies.

News ID: ۷۸۴۳۹۷

12 December 2018

According to the CBI website, experts who attended a meeting with CBI boss Abdolnaser Hemmati (the fourth such meeting) emphasized the need for reforming the monetary and banking system, curbing liquidity, gradually lowering interest rates and reviving growth.

Accurate estimation of oil export revenues in the next budget, unifying currency rates, restoring banks' credibility and adopting measures to avoid budget deficits in the coming year were among issues discussed in the meeting.

"Opening a financial payment channel between Iran and its economic partners and discarding the dollar from Iran’s foreign trade are crucial for overcoming the detrimental effects of financial sanctions, Financial Tribune quoted Hemmati as saying.

"Bilateral currency swap agreements have been reached with several countries and will be strengthened in the future," the senior banker said.

In September Turkey, Russia and Iran agreed to use their local currencies for trade between the three countries.

Hemmati said at the time that a meeting with authorities of the Turkish and Russian central banks would be held soon and hoped that the agreements will come into effect soon.

The three countries agreed that the US dollar should not be used for trade, Hemmati said. He added that transactions would be made over designated currency exchange rates.

In November, European Union officials proposed to establish a special purpose vehicle (SPV), to facilitate financial transactions with Iran.  In the meantime, EU's foreign policy chief, Federica Mogherini, expressed hope on Monday that the payment channel would be finalized in the upcoming days.

Hemmati pointed to the gradual repatriation of export earnings into the economic cycle saying that "given the downward trend of currency rates and injection of more currency into the economic cycle, raw materials needed for the production sector are expected to be imported at much lower rates."

The CBI eased foreign exchange rules In August and allowed money changers to resume work at open market rates as part of the latest rescue package devised to calm the chaotic currency market.

Foreigners Not Aware of Nima

Meanwhile, the chairman of Iran-China Joint Chamber of Commerce, Asadollah Asgaroladi, criticized the way importers need to acquire currency, saying that foreign buyers are not familiar with Nima (a local acronym for Forex Deals Integrated System) and insist on payments via banks.

According to CBI directives, exporters are obliged to repatriate their forex earnings via Nima, but most foreign companies buying from Iran are not familiar with the system, he said.

"If they transfer the money via bank channels, the supervisory body in the US Treasury Department,  which oversees the implementation of sanctions, will block their accounts... We have to find a new way to return the currency earnings,” he said at a ceremony held to honor top exporters of Tehran Province.

According to forex repatriation rules revised by CBI, all exporters of goods and services are obliged to return their export earnings to the country’s economic cycle.  The rules stipulate that earnings of up to €1 million are exempt from selling through Nima but they may use it for import of goods and services needed for their own businesses or give it to other importers.

Also for earnings of up to €1-3 million, exporters are  obliged to offer 50% of their export earnings on Nima and for revenues over €10 million they should sell 90% via Nima.