Iran’s Trade Landscape in Next Fiscal Year

EghtesadOnline: Iran’s foreign trade is struggling to cope with political and economic challenges, as well as the deteriorating economic situation caused by US sanctions, special commercial circumstances and mounting operating costs, to drive down overall spending.

News ID: ۷۸۵۴۱۸

29 February 2020

In a write-up for the Persian-language daily Donya-e-Eqtesad, Hossein Salahvarzi, deputy head of Iran Chamber of Commerce, Industries, Mines and Agriculture, has provided an outlook of the country’s trade next year. According to Financial Tribune, excerpts follow:

Governments know that in order to maintain a balance in the economy, they need to generate more foreign currency than they spend. This was the highlight of businesses’ activities in the current year.

Foreign trade has been upgraded from an insignificant phenomenon in the past years to the main, crucial variable of Iran’s economy these days.

Since last year, the government has placed double pressure to restrict imports. In the budget bill, the government has proposed for the next year (March 2020-21) that total revenues from import tariffs have been projected at 200,000 billion rials ($1.26 billion), indicating a 38% decline compared with last year’s (March 2018-19).

Import tax revenues in the current year’s budget (March 2019-20) were put at 330,000 billion ($2 billion), accounting for 19% of total tax revenues. When compared with next year’s budget proposal, import tariffs’ share from total tax revenues has declined to 11%.

The tariff on “entry of other goods” accounts for the lion’s share of other forms of import tariff over years. In the next year’s budget bill, its share has been set at 10% compared with 17% in the fiscal year ending March 2019 and 16% in the fiscal year ending March 2020. The budget bill does not provide specific figures for other forms of import tariffs. Given the political and economic pressures placed by several parties and some organizations on importers, it seems that conducting imports will be a tough task next year. The transfer of needed resources for imports from different countries will also face the hurdle of sanctions next year.

Petrochemicals and gas condensates will be Iran’s main exports next year. The government is not hopeful about next year’s oil exports. It forecasts next year’s export revenues to reach $26-34 billion.

The central bank’s pricing policy and the rise in producer inflation in Iran would lower trade competitiveness of Iranian products compared with those made by other countries. Difficulties associated with the transfer of foreign currencies yielded via exports would also discourage exports.

Exports will be affected by two other factors: pressure exerted by domestic enterprises for buying export products, including steel, petrochemicals and other base metals under the pretext of safeguarding employment and the growth in prices of commodities in the local market would reduce motivation to export.

Conflicts in the Middle East and tensions in relations with Iran will threaten Iran’s biggest export market i.e. Iraq.

Foreign Trade at $79b in 11 Months

Fresh data on Iran's trade show the country exchanged $79 billion worth of goods during the first 11 months of the current year (started March 21, 2019).

Exports (except those of crude oil) and imports during the first 11 months of the current year, which started on March 21, 2019, stood at $39 billion and $40 billion respectively, Minister of Economic Affairs and Finance Farhad Dejpasand said in a meeting with representatives of Tehran Chamber of commerce, Industries, Mines and Agriculture.

Noting that capital goods account for 85% of imports, the official added that at present exporters are the main suppliers of foreign currency needed for imports.

“Maritime transport accounts for more than 90% of global trade. Countries with access to high seas have considerable potentials to benefit from foreign trade," Mehdi Mir-Ashrafi, the head of Islamic Republic of Iran Customs Administration, who was also present at the meeting, said.

“In the 1960s, the United Nations Conference on Trade and Development announced that Iran enjoys excellent geographical advantage for maritime trade, because of its thousands of kilometers of sea borders. We are the only country located along the route of the International North-South and East-West Transport Corridors,” he added.

“Each day of customs delay equals 1% of the final price of the item. This is while IRICA does not have access to shipping data once they arrive at customs and ports. Customs procedures should become electronic, as counterfeiting mostly take place during paperwork,” he was quoted as saying by ILNA.

Oil-driven products and byproducts as well as petrochemical products are included in IRICA's export data. In fact, petrochemicals and gas condensates constitute the biggest share of total exports.

Amid trade restrictions faced by Iran as a result of sanctions, the country has focused its exports on neighboring countries.

According to Deputy Industries Minister Hossein Modarres Khiyabani, Iran currently has a 2% share in the neighboring countries' total imports and if the target is realized, the share will rise to 4%.

“Neighboring states have $1.2 trillion worth of imports [per year] while Iran’s share is only $24 billion,” he said.