To halt the slide of local currency, the government announced it would replace the country’s dual exchange rate system with a unified one on April 11.
The unified official rate was set at 42,000 rials per dollar and the government pledged to grant foreign currency at the official rate to all importers, as announced by First Vice President Es’haq Jahangiri then.
“The government’s promise and its allocation of $15 billion line of credit triggered a surge in registration of import orders at Trade Promotion Organization of Iran’s import registration website,” President of TCCIM Masoud Khansari said at the meeting, according to Financial Tribune.
This misguided decision brought about negative consequences. Many formed long queues to receive currencies at the cheap rate before selling their goods on the open market to gain massive profits.
According to Minister of Industries, Mining and Trade Mohammad Shariatmadari, demand for registration orders increased by 3.5 times in the past four months compared to the similar period of last year, ISNA reported.
“But on August 7, the government sought to fix things with a new forex policy, a complete about-face from the policy of the last four months,” the news portal of Tehran Chamber of Commerce quoted Khansari as saying.
According to the new forex policy, which is closer to market economy, hard currency would be made available at a subsidized rate only for the purchase of essential goods and medicine. Other imports, labeled as "non-essential goods", have to get their foreign currency through the Secondary Forex Market.
The government subsequently eased foreign exchange rules and allowed money exchangers to resume work at open market rates.
The implementation of new foreign exchange policies has meaningfully curbed unnecessary demand for cheap currency. However, according to Khansari, there are drawbacks in the new forex policy.
“One of the problems with the new policy is that goods imported in recent months can receive customs clearance only if their owners cover the difference between the government’s subsidized foreign currency rate (42,000 rials per dollar) at which they registered their import orders before the new forex policy took effect and the value of foreign currency presently determined by the Secondary Forex Market,” he said.
That has left huge volumes of imports, including raw materials and manufacturing machinery, stuck at the ports in recent weeks, raising storage costs, leaving customs in a limbo, and hampering production.
Fortunately, on Wednesday, Shariatmadari announced that to support manufacturers and prevent the pile-up of goods at customs, importers of manufacturing machinery and raw materials will be exempted from paying the above-mentioned difference.
"The Islamic Republic of Iran Customs Administration allows local producers to clear up to 80% of their imports of raw materials and industrial machinery before going through customs procedures and formalities," the head of the Islamic Republic of Iran Customs Administration, Foroud Asgari, who was also present at the meeting, said.
IRICA's latest statistics show Iran’s non-oil foreign trade in the first four months of the current Iranian year (started March 21) stood at $30.62 billion, indicating a 4.5% rise compared with last year’s corresponding period.
Non-oil exports during the period hit 37.4 million tons worth $15.45 billion, indicating a 14.69% increase year-on-year, IRICA’s latest report says. Non-oil imports amounted to 11.55 million tons worth $15.17 billion, down 4.5% YOY.
China was the main customer of Iranian products during the four-month period, as Iran exported $3.46 billion worth of goods to the Asian country, 8% more than last year’s similar period.
Other major export destinations included the UAE ($2.8 billion), Iraq ($2.52 billion), Afghanistan ($1.1 billion), South Korea ($821 million) and other countries ($5.14 billion).
Major exporters to Iran included China ($3.89 million), the UAE ($2.16 billion), India ($912 million) and Germany ($753 million).