“The market now is relatively stable,” Ali Rabi’ee said, underlining the need to maintain the status quo.
“Extension of the CBI governor’s mandate was necessary to maintain this stability,” Fars News Agency quoted him as saying.
The council -- a top economic decision making body comprising the head of three branches of government -- gave the go-ahead to the Central Bank of Iran last year to step in and intervene in the forex market following a period of steep forex rate volatility leaning heavily on chaos in the currency market, Financial Tribune reported.
The currency crisis began in the spring of last year after US President Donald Trump’s decision in May to pull out of the landmark 2015 nuclear deal Iran had signed with the six world powers.
Soon after Trump imposed tough economic sanctions and claimed he would use “maximum pressure” to bring Tehran back to the negotiating table for talks on the nuclear and other key issues.
A former head of the Central Insurance company of Iran, Hemmati succeeded Valiollah Seif at the CBI in July 2018.
Seif Forced to Go
His predecessor was forced to resign following mounting criticism over his inability to control forex rates and curb market volatility that led to the tanking of the rial to unprecedented lows.
The rial lost more than 60% of its value between April to September 2018, spurred by threats of new US economic restrictions and dim prospects for currency reserves as oil revenues took a drubbing unseen in recent decades.
The market turmoil lingered for two months after Hemmati’s arrival only to see a sharp change of course in early autumn.
Forex rates embarked on the downward trajectory thanks to the authority given to the CBI by the top council to control the situation and prop the national currency.
Around the time that CBI was first authorized to handle the forex market, the USD had soared as high as 180,000 rials and the national currency lost approximately 60% of its value, thanks to the avaricious middlemen and speculators long involved in gouging currency prices.
The greenback fell below 110,000 rials in early October, according to data compiled by the Financial Tribune.
Unlike in the first half of last year and given the concerted efforts of the CBI, the currency market has seen much less fluctuation since April.
According to Hemmati the rial has regained more than 40% of its value since the regulator started effective intervention in the summer of last year. The dollar sells for around 113,000 rials in the open market in Tehran.
Discipline and Delivery
CBI intervention mainly involved increasing the supply of foreign currency in the market and pushing for disciplinary measures to curb speculation by greedy currency dealers and smugglers.
In doing so, the CBI used banks and bank-affiliated exchange bureaus and was able to deliver – something few observers had anticipated.
To increase the supply of hard currency in the market and meet the needs for importers, the regulator introduced another package as per which exporters of non-oil goods were compelled to repatriate their overseas earnings.
This, to a considerable extent, has compensated the decline in crude oil export revenues, the lifeblood of the Iran’s economy.