Addressing a meeting of government officials and private sector leaders held for discussing the latest business developments on Saturday, Yadolla Sadeghi said in a performance report that out of the total €48 billion foreign exchange allocated for imports, close to €22 billion was allocated in Tehran Province alone.
"About €82.8 billion in orders for foreign exchange has been registered, €34 billion of which was registered in Tehran Province," he said.
According to the Tehran Chamber of Commerce, Industries, Mines, and Agriculture website, 8% of the total forex was allocated for essential or "first category goods." Goods in the second and third categories took 85% and 7% of the foreign currency, respectively, Financial Tribune reported.
Eligibility for foreign currency for imports based on their priority was charted out by the Central Bank of Iran last June. The regulator classified imported goods into three main categories.
Those listed in the first category include basic and essential goods like staples such as oil, rice and wheat. The currency needs for this type of goods are available from oil export revenues and sold at subsidized rates (USD=42,000).
The second category goods, includes "raw materials and intermediate goods," whose currency needs are met from the export of petrochemicals, steel and mineral products.
The third list is of other consumer products with the currency sourced from export earnings repatriated to the Nima system (integrated forex deals system).
Sadeghi spoke of the percentage of allocated currency to registration orders in the outgoing fiscal, which was below 50%, and said it indicates the critical need for revisiting foreign currency allocation procedures.
Last year the government decided to fix the USD rate at 42,000 rials, on the promise that it can meet all currency needs at the subsidized rate, ignoring the advice of economists and private sector leaders that the policy of imposing rates would fail, again.
However as demand for imports at subsidized rates (which was way lower than the black market rate) shot up overnight, the government panicked only to admit that its latest forex move was futile and cannot deliver.
Single Rate Currency
Masoud Khansari, head of Tehran Chamber of Commerce, Industries, Mines and Agriculture, another speaker at the meeting, pointed to the forex rate volatility as a bane of businesses. He said forex rate unification can and will be the key to overcoming economic problems the country has been saddled with for years.
He pointed to the bleak future of the economy along with prospect of the rising inflation in the next fiscal (starts March 21), calling for urgent measures on the part of government to weather the storm.
“Forecasts speak of -3.5% economic growth for the next fiscal. This is while runaway inflation is expected to continue,” he warned.
Khansari spoke about energy subsidies that he believes have “strangled” the economy, urging government to concentrate on the subsidy issues in the coming year and come up with a workable solution.