Mohammadreza Modoudi referred to flaws in forex policies, saying weakness of forex rules have paved the way for a group of novice exporters to enter the foreign trade arena with hired commercial cards.
“Tapping into opportunities created for exporters in light of currency policies, exporters used 6, 447 new commercial cards to export goods last year (March 2018-19),” he was quoted as saying by IRNA.
According to Modoudi, the cards lack any commercial records and were mostly hired by other exporters, Financial Tribune reported.
The value of exports undertaken via the cards was to the tune of $5.4 billion when total non-oil exports reached $40 billion last year.
Modoudi reiterated that the emergence of hired commercial cards has incurred extra costs on export, blaming the phenomenon to legal loopholes.
Not a Crime
“It cannot be said that those who used the commercial cards have committed a crime,” he said, echoing the argument of card users who claim that they have made the best possible use of existing rules.
“If there is a flaw, it is in the rules and regulations, and has nothing to do with executive issues,” he said.
Modoudi classified those who hire commercial cards into two categories.
First, there are those who hire the cards to export goods up to the ceiling set by the government to evade the mandatory forex repatriation commitments mandated by the
Central Bank of Iran
The CBI has exempted non-oil export earnings to the tune of $1 million from returning their earnings to the economic cycle of the country.
Most hired cards were used by the smaller firms who apparently made the best possible use of CBI rules.
While the first group used the higher number of commercial cards, a bigger portion of exports was handled by the second group of exporters.
Using 455 cards, the latter exported goods to the tune of $4.7 billion, accounting for 80% of the total exports using hired cards.
Three Evils
Modoudi reckoned that the hired commercial cards have afflicted the national economy in three main areas.
First, the practice disrupted enforcement of the government’ forex policies.
In light of US economic sanctions that have hit Iran’s oil industry, authorities in Tehran are struggling to improve non-oil export income and persistently urge exporting companies to play by the rules and bring back their earnings.
In line with these efforts and in a bid to boost transparency in allocating foreign currency for import and keeping abreast of overseas non-oil export earnings, the government launched a secondary market, dubbed Nima, in April 2018.
Nima is a CBI-affiliated platform where exporters sell their overseas currency earnings and importers purchase the currencies for importing non-essential goods, machinery, equipment and raw materials.
The system logs data bout repatriated and currency traded for import and export.
Of more than $40 billion worth of non-oil exports in the last fiscal year, data shows that $30 billion was repatriated.
This while the deadline set by the CBI for non-oil export companies to repatriate currency earnings during the last fiscal year ended on July 22.
Observers blame users of hired commercial cards and neophyte exporters for the failures to repatriate the remaining overseas earnings, arguing that credible traders are less likely to breach rules guiding forex repatriation.
The official pointed to extra burden on export costs as the second problem.
Owners of the commercial cards reportedly charge 1,500 -2,000 rials per dollar of the export value.
This means 8-10 trillion rials is added to the $5.4 billion in exports handled by hired cards.
“This is obviously against our strategy of cutting export costs,” he said.
The last, but not the least, is the potential for unhealthy practices in spurring competition among exporters.
“When the same cards are used by different people, the quality of export is overshadowed [by the quantity], ” he said.