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Rouhani Assures Business Community on Forex Policy

Apr 28, 2018, 4:49 AM
News ID: 24517
Rouhani Assures Business Community on Forex Policy

EghtesadOnline: President Hassan Rouhani sought to assure the private sector of the long-term effects of the government's new foreign exchange policy, saying the measures are aimed at market stability and sustainable economic growth.

The president made the remarks during a meeting with the country's top business figures on Thursday which was the first such one-on-one talks since the administration unveiled striking new policies which included imposing an exchange rate of 42,000 rials to the US dollar on April 10. 

"[New forex measures] will be of utmost help to producers and exporters for their economic planning and to achieve this goal, cooperation and synergy between the private sector and banks are essential," Rouhani was quoted as saying by president.ir. 

The president also reiterated that the country's foreign currency earnings are in a healthy shape and that the government will provided all hard currency needs of the country with total transparency, according to Financial Tribune. 

As per the government's new decisions, the US dollar for all purposes including imports, travel, overseas students and research projects will be offered by the government without any limit at the exchange rate of 42,000 rials. 

The announcement was later followed by several other measures approved by the Cabinet and subsequently notified by the Central Bank of Iran. 

It was decided, among other measures, that travel currency would be allocated only up to €1,000 or its equivalent in other currencies once per year and €500 if the trip is made to a neighboring or allied country, although the CBI chief Valiollah Seif later backtracked on the announcement, saying that travelers should "remain patient" for further decisions to be made.   

Also according to the new rules, possession of foreign exchange by individuals is allowed only to a ceiling of €10,000 or its equivalent in other currencies and anyone possessing more than that amount should either deposit it in a bank or sell it to the banking system. 

More controversially, the Cabinet has also ruled that all exporters are required to bring back their export earnings back to the country's "economic cycle" either by selling them to or depositing them in banks or reuse it for imports. 

This latest measure, in particular, has touched a raw nerve with the business community which regards the decision as an assault on open market rules and regression to populist policies. 

---Export Promotion   

At Thursday's meeting, Rouhani thanked businesses for "cooperating" with the execution of the measures, saying that in the new system, exporters "should not even wait for a day" in order to sell their hard currencies. 

He called on banks to attract foreign-currency deposits, asking all the entities to synchronize their efforts to promote exports. 

Mohammad Lahouti, the head of Iran Export Confederation, who was present at the gathering, said the president had ordered measures to pave the way for banks paying in advance for exporters' export earnings in rial (a contract known by its Islamic term 'Salaf'.) 

"We also shared our concerns about the effects of the forex measures on non-oil exports so that hard currency would be delivered at 42,000 rial rate to imports which end up being used for domestic production without limits," he was quoted as saying by IBENA.

"The president underlined promotion of export given the increase in export figures in recent months," Lahouti added.

The latest report by the Islamic Republic of Iran Customs Administration shows that non-oil exports hit 7.98 million tons worth $3.13 billion in the first month of the current fiscal year (March 21-April 20) indicating a 15.9% increase year-on-year.  

The figures also show that Iran’s non-oil foreign trade stood at $5.66 billion, indicating a 12% rise compared with last year’s corresponding period.

Non-oil imports also amounted to 1.93 million tons worth $2.52 billion, up 7.7% YOY.