TCCIMA Member: Currency Repatriation Rules Lack Efficacy

EghtesadOnline: A member of the Tehran Chamber of Commerce, Industries, Mines and Agriculture has cast doubt on the efficacy of the new export earning repartition rules and urged the Central Bank of Iran to bear with exporters regarding currency repatriation procedures.

News ID: ۷۸۴۷۰۲

01 June 2019

“The new directives don’t appear to be implementable because given the hurdles on returning money to the country, it is not realistic to expect exporters to repatriate 50% of their earnings within a short period of time,” Mehdi Pourqazi, head of the Mine and Industries Commission of TCCIMA told ISNA.

Under the circumstances and when Iran’s international banking and trade is struggling “due to lack of cooperation of foreign banks, it would be better to give exporters a freer hand in repatriating their overseas earnings.”

In his opinion “If the government insists on repatriating currency earnings in cash it should first create the proper grounds.”

Based on rules announced by the CBI in mid-May, according to Financial Tribune, exporters of non-petrochemical goods are obliged to sell at least 50% of their earnings on Nima (Persian acronym for integrated forex deal system) and 20% in cash to money changers. The balance can be used for importing goods either by the exporting firm or any other third party.

Petrochemical companies must bring back a minimum of 60% of their forex earnings and sell it via the Nima system.

Nima is the platform where exporters sell their currency earnings to companies importing non-essential goods.

Referring to the available data, Pourqazi recalled that Iraq and Afghanistan are the Iran’s key export destinations. He criticized the CBI for failing to set up a robust, responsible and efficient financial channel for returning export earnings from the two neighbors.

According to the latest report released by the Islamic Republic of Iran Customs Administration, Iraq was Iran's second biggest export destination after China.

The neighboring Arab state imported 18.3 million tons of non-oil goods from Iran during the 11 months to Feb. 19.

Iran’s exports to Iraq mainly included liquefied natural gas, mineral oils, detergents and tomatoes.

Iranian merchants traded 2.79 million tons of non-oil commodities worth $1.43 billion with Afghanistan during first half of the previous fiscal (March, 2018-19). Afghanistan was Iran’s fourth major export destination during the period.

Unrealistic

It needs mention that the rates quoted for foreign currency in Nima are not real and it wouldn’t be fair to “ask exporters buy raw materials for their manufacturing units at the open market rate while expecting them to sell their export earnings at the lower Nima rate,” Pourqazi said echoing the stance of a large number of businesses involved in exports.

On the provisions of the new directives that allows exporting companies to use 30% of their earnings for importing goods, he said the incentive is simply not effective because exporters of industrial products need more than the government-restricted amount to import raw materials.

Currency rates at Nima are lower than the open market. Each USD sells for about 100,000 rials in the Nima system when in the open market it sells for 140,000.

According to present rules, export earnings should be returned via one of the following ways:  selling currency on  Nima, cash transfers through hawalah, selling to bureaux exchanges, and using it to import goods and machinery either by the exporting company itself or any other third party.