“It does not make sense to repatriate earnings in rial. When you export to a country, the earnings should return in the national currency of the importing country,” or any other major currency, he told state TV on Friday.
“When export earnings are returned in rial, it is akin to bleeding of the country, which gradually weakens the economy”.
As far as the government is concerned, export in rial is tantamount to capital flight. Hemmati argued that returning export earnings in rial means goods manufactured in the country and the added value flows out of the country, Financial Tribune reported.
Exporters to some neighboring countries especially Iraq and Afghanistan have always complained that their bills are paid by the importing companies in rial rather than foreign currency (not even in afghani or dinar) and therefore they should be exempt from currency repatriation rules.
When goods are exported, Hemmati said, earnings must either be in foreign currency or imports of other goods, otherwise the economy will suffer.
Rules related to the repatriation of export earnings became tougher after the United Sates re-sanctioned Iran in the spring of 2018 unleashing a severe shortage of foreign currency when oil exports declined cutting off a large part of currency revenue.
Soon after the government obliged exporters to sell their export earnings to a secondary market at an exchange rate set below the higher open market price.
In this system, locally known by the acronym Nima, importers declare their currency needs, exporters register their currency proceeds and banks and authorized moneychangers act as dealers.
The CBI exercises oversight and has control over currency demand and supply.
High Temptation
The CBI boss referred to earlier procedures in which exporters had no obligation to repatriate foreign earnings, saying that the wrong procedure “tempted avarice traders to buy real estate overseas using tens of billions of dollars that belong to the nation.”
He rejected the criticism that during his tenure the regulator had imposed tough restrictions both on exporters and manufactures, reiterating that he is a strong proponent of export promotion.
“I back exports that create added value and generate foreign currency. Export without forex earnings do not help in the development of a country.”
Foreign currency repatriation rules oblige exporting firms to return their earnings in the following ways: selling currency on Nima, cash transfer through hawalah, selling to the bureaux exchanges.
Currency repatriation can also be undertaken through import of goods and machinery either by the exporting company itself or any other third party in Iran.
Non-oil exporters have so far repatriated $28 billion of their earnings since the launch of the secondary market in the spring of 2018.
This is while the value of exports surpassed $40 billion during the period. This means that exporters failed to bring back $12 billion.
Hemmati said the CBI has sent to the judiciary a list of 140 legal and natural entities who have not abided by the currency repatriation rules.
He said they have not returned $4 billion rials of their earnings.
Importing Outside the CBI Realm
The senior banker pointed to an earlier practice pursued by some companies to import goods without asking the CBI to allocate foreign currency, saying this disrupted the forex market.
This category of importers bought currency in the open forex market.
Hemmati said the activities of these groups of importers affected forex market volatility by increasing demand for foreign currency.
Saying that they import goods using their own foreign currency, they disregarded the government’s import-export regulations.
Hemmati said the practice led to rampant import of non-essential goods for some time at the cost of undermining domestic manufactures.