According to the economist Amir Houshang Amini, neither of which will result in anything but all-encompassing corruption stemming from the freedom allowed for the price of the dollar in an otherwise command economy.
Last week, the Central Bank of Iran announced the inauguration of the Secondary Forex Market, wherein importers and exporters are allowed to set a negotiated dollar rate for making transactionZ, Financial Tribune reported.
In a command economy such as Iran’s where the government and the Chamber of Commerce impose heavy costs on potential exporters, with the cost of receiving an export permit and standards amounting to billions of rials, it would be unwise to deploy elements of free trade, Amini wrote in an opinion piece for Iran Chamber of Commerce, Industries, Mines and Agriculture.
After a bump in the dollar’s exchange rate against the rial, the government, more precisely the Central Bank of Iran, issued a relief plan, setting the price of the dollar at 42,000 rials and providing certain entities with dollars at the rate of 38,000 rials in order to meet the country’s need for essential goods.
The plan failed and increased the turmoil of an already-fluctuating market.
“The exchange rate should be determined in accordance with the country’s potential reserves and the economic policy of the governing system. As long as barriers to access the potential foreign exchange reserves of the country are not dealt with and the transition to a free market economy does not occur, foreign-currency exchange rate should remain in full control of the government,” the economist wrote.
“All items, essential or otherwise, should be subject to the same rate of exchange. Aberrations such as allocation of funds to certain entities at rates different from what is allowed to others should be uprooted,” he said, as it is virtually impossible to truly control the forex rate.
As a result, the standard of living, especially in metropolises, does not correspond to the average per capita income.
From the perspective of Amini, mechanisms should be put in place to ensure the correspondence between the standard of living and per capita income; barriers imposed upon production directly and indirectly by the government, the chamber of commerce and other relevant organizations should be removed; and liquidity, currently amounting to 15 quadrillion rials (about $345 billion based on the current subsidized rate), should be reduced through Incidental Income Taxation (tax on cash or non-cash income that a real or legal person earns ex gratia or through favoritism or as an award or under any other similar titles). This will help stem the massive gains of profiteers, be they legal or natural, and control the flow of money.
Until such time when all of the above criteria are met, the government should not divert from its command economy policies.