As reported by the local media on Wednesday, money exchange shops, which once played the dominant role in the currency market in the absence of banks, have now been entrusted with the task of meeting "minor" hard currency needs at open market rates.
The Central Bank of Iran's new rules for exchange houses come with the caveat that they should adhere to CBI's forex rules as well as anti-money laundering regulations.
In a directive published on CBI's website on Tuesday, the bank said the purchase and sale of export hard currency by exchange bureaux would only be possible through the Forex Deals Integrated System (known by its local acronym Nima), Financial Tribune reported.
It also requires exchangers to sell the acquired export currency within three working days 1% higher than the purchase rate at Nima.
As for the physical trade of currency, the bank has listed 23 needs for which applicants can go to exchange shops and buy foreign currency.
It includes travel currency, which was previously limited to €500 and €1,000 for regional and distant countries at the official rate. Based on the new measures, travelers can obtain up to €5,000 by showing the relevant documents such as the ticket, passport and visa (for countries where visa is required for entry).
Other Currency Needs
Other needs that can be met through a visit to an exchange shop by providing relevant documents include medical treatment, college tuition, the cost of publishing in a journal, participation in overseas exhibitions, foreign legal disputes, subscription fees to foreign publication or website, publishing advertisements abroad and purchasing the rights to broadcast films, which also requires the approval of the Ministry of Culture and Islamic Guidance.
Other recognized needs include foreign exchange costs of tourism and travel agencies and transit costs of postal packages.
The measures come as the secondary foreign market is also handling the trade of hard currency of major non-oil exports at negotiated rates. The central bank announced that currency trade worth €6.5 million, 37 million dirhams and $330,000 were traded through Nima on Tuesday.
It said that each euro and dollar were traded at 93,300 rials and 89,500 rials respectively, which are slightly lower than the open market rate. According to local news sources, as of Wednesday, exchange houses did not publicize any currency rate.
In the open market, the dollar was reportedly traded at around 98,000 on Wednesday–lower than the psychological barrier of 100,000 rials.
Announcing the measures on state television, Abdolnasser Hemmati, the newly-appointed Central Bank of Iran's governor, hoped that his bank would never have to interfere in the market so that it could "balance" by itself.
The government decided to unify the US dollar's exchange rate at 42,000 rials on April 9 in response to volatility that saw the rial sink to all-time lows against the greenback.
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.
Criticism about the government's forex controls came to a head when reports of widespread abuse and rent-seeking were disclosed by the lucky few that had access to cheap currency.
It also caused demand for imports to skyrocket, leading to a subsequent decline in exports.
US President Donald Trump’s decision to pull out of an agreement to lift sanctions in return for Iran curbing its nuclear program contributed to a run on the rial, as companies and people brought their savings to buy hard currency and protect their purchasing power in the face of the steadily declining value of national currency.