Latest statistics released by CBI show it supplied $1.985 billion to import corn; $910 million to oilseeds; $405 million to barley; $1.2 billion to raw vegetable oil; $990 million to soybean meal; $677 million to wheat; $40 million to fertilizers; $36 million to paper; $1.107 billion to medical equipment and $1.39 billion to import pharmaceuticals and their raw materials during the period under review.
Also known as necessity goods, essential goods are products consumers will buy, regardless of changes in income levels.
As per the decision of the government’s economic headquarters, a total of $8 billion at the rate of 42,000 rials per US dollar were to be allocated to supply essential goods in the current fiscal year (ending March 20).
Of the total sum, $5.5 billion are to be allocated to import corn, oilseeds, raw vegetable oil, soybean meals, barley and wheat, $1.5 billion to import pharmaceuticals and $1 billion to import medical equipment.
“A total of 4 million tons of essential goods were imported to Iran during the 10 months to Jan. 19,” Amir Talebi, an official with the Government Trading Corporation of Iran, said recently.
“Since the beginning of the current Iranian year, 194 vessels carrying essential goods docked and were unloaded at the country’s ports. Imam Khomeini Port located in the southern Khuzestan Province accounted for 45% of imports, Bandar Abbas, a southern port city in Hormozgan Province, constituted 31%, and Chabahar in Iran's Southeastern Province of Sistan-Baluchestan accounted for 17% of total imports; the remaining volume entered the country via northern ports,” he was quoted as saying by IRNA in January.
Commission Votes for Raising Subsidized Forex Rate
The Joint Commission of the Iranian Parliament recently decided to change the exchange rate for importing essential goods from 42,000 rials to 175,000 rials per dollar, suggesting that the prices of essential imports would be set in accordance with the exchange rates of the so-called secondary FX market, known by its Persian name Nima.
The real market price of the dollar is about 60% higher.
According to Rahim Zare’, the spokesperson of the commission, the move is aimed at unifying the exchange rates and preventing the supply of imports at free market rate by importers as well as fighting corrupt and rent-seeking practices.
“Importers used to sell their products at prices determined by the free market despite the government’s allocation of subsidized forex at the rate of 42,000 rials per US dollar,” he was quoted as saying by IRNA.
The government’s revenues are projected to increase by 400 trillion rials ($1.6 billion), provided that the commission’s proposal is approved by the parliament during its open sessions.
Majlis Joint Commission, composed of representatives of all specialized parliamentary commissions, is responsible for reviewing budget bills as well as five-year development plans proposed by the government before they are put to a vote by MPs.
Decline in Imports of Essential Goods
Imports of all essential goods, except corn, declined this year compared with last year, Domestic Commerce Commission of Iran Chamber of Commerce, Industries, Mines and Agriculture recently reported, citing figures released by the Central Bank of Iran.
Over nine months to Dec. 20, the central bank paid $4.42 billion at the exchange rate of 42,000 rials per US dollar for the supply of essential goods, registering a 41% decline compared with the corresponding period of last year, Ashraf Mortezaei, an expert with the commission, said.
“Order registration for importing essential goods stood at $12.24 billion during the nine-month period, posting a 17% year-on-year decline. Since the beginning of the Iranian year to Dec. 20, a total of $9.25 billion have been allocated to essential goods, which is $500 million less than last year’s similar period,” she said.
“The value of discharged essential goods stood at $6.23 billion in the nine months to Dec. 20, indicating a 30% drop compared with $8.9 billion of the last year’s same period.”
On the five essential goods that have the highest impact on households’ livelihoods, namely corn, soybean meal, unprocessed oil, oilseeds and barley, Mortezaei said these items accounted for half the value of subsidized currency allocated for the imports of essential goods during the period, which shows a 5% decrease YOY.
“The government planned to allocate $6.4 billion for the import of these five items during the fiscal 2020-21. By Dec. 20, a total of $4.75 billion were allocated and $4.3 billion were paid, suggesting that the government has to pay the remaining sum of $2.1 billion by March 20, 2021,” Otaghiranonline.ir quoted her as saying.
According to the official, over $3.08 billion were provided for importing corn, soybean meal and barley in the nine-month period, showing a 14% YOY decline.
“Prices of raw oil and oilseeds and, accordingly, vegetable oils saw a 15-25% growth in the current year. Over the last nine months, 702,000 tons of raw oil worth $559 million were discharged from customs. Imports of oilseeds stood at 1.7 million tons worth $807 million, indicating a 15% rise in weight but a 7% decline in value YOY. Altogether, custom clearance of oilseeds and raw oil imports indicates a decline of 22% in weight and 7% in value YOY,” Mortezaei said.
According to members of ICCIMA’s Domestic Commerce Commission, challenges facing the supply of essential goods in the next fiscal year (March 2021-22) include government intervention, misguided policies regarding market regulation, hurdles in the way of timely allocation of foreign exchange, lack of transparency about the country’s strategic reserves, barriers facing transfer of currency, inflation and decrease in demand due to the shrinkage in people’s purchasing power and production problems as a result of the burgeoning money supply.
As per the budget bill for the next year (March 2021-22), the government will provide $8 billion for the supply of essential goods. But the correlation between the sum of allocated forex and the exchange rate has not been stated and the budget fails to indicate how long the government would keep the cheap imports policy.
On the other hand, there is not enough transparency regarding subsidized forex allocation and pricing. The level of essential goods reserves by March 20, 2021, and the next year has not been specified.
Furthermore, the import of essential goods and market regulation policies, as well as the government’s policies to protect and promote the economic wellbeing of households, is ambiguous.
Kaveh Zargaran, the chairman of the commission and secretary of the Federation of Iranian Food Associations, believes that the government is likely to rid itself of subsidized import policy completely by the end of the current fiscal year (March 20), given the Minister of Industries, Mining and Trade Alireza Razm-Hosseini’s approach.
“As such, prices will increase to some extent and demand will decline and a relative recession will come eventually. Food and related industries are likely to experience a relative recession by the end of the year and the beginning of the new Iranian year,” he said.
“The flow of imports has all but stopped by the importers of raw materials and essential goods who are unwilling to take risks given the pressure of sanctions and the state of government’s budget and the central bank,” he said.
“As the representatives of producers and economic operators, the Ministry of Industries, Mining and Trade is looking for a unified foreign currency exchange rate. Today, we are anticipating that the parliament might take a revolutionary decision in this regard,” the industries minister said recently.
A total of 17.46 million tons of essential goods worth $8.76 billion were discharged from Iranian customs during the nine months to Dec. 20, according to Rouhollah Latifi, IRICA’s spokesperson.
Overall imports stood at 25 million tons during the same period, of which 70% were categorized in 25 groups of essential goods, he added.
A total of $26.8 billion worth of goods were imported into Iran during the period.
“Five essential items, namely corn, barley, oilseeds, raw oils and soybean meal, were subsidized imports weighing 12.29 million tons worth $4.14 billion. They accounted for 49% of the country’s overall imports and 70.5% of overall essential goods imports in terms of weight,” he was quoted as saying by IRNA.
Corn imports stood at 7.24 million tons worth $1.77 billion during the period under review; it was the top subsidized imported commodity both in terms of weight and value.
It was followed by 1.84 million tons of oilseeds worth $949.75 million; 756,121 tons of raw oils worth $627.86 million; 1.1 million tons of soybean meal worth $461.74 million; and 1.34 million tons of barley worth $326.83 million.
Among other essential goods imported during the period were pharmaceuticals and medical equipment worth $1.23 billion; rice worth $707.87 million; wheat worth $696.51 million; raw sugar worth $357.23 million; manufacturing machinery worth $327.27 million; dried tea worth $221.18 million; heavy duty tires worth $206.24 million; and paper pulp worth $144.25 million.
According to Latifi, publication paper worth $142.6 million; chemical fertilizers worth $123.78 million; pulses worth $111.36 million; frozen red meat worth $104.73 million; technical pesticides worth $58.43 million; livestock pharmaceuticals worth $47.02 million; butter worth $38.47 million; fresh red meat worth $28.61 million; print paper worth $3.79 million; and chicken worth $203,408 were the other essential imports during the period under review.
“March 20-Dec. 20, 2020, imports of essential goods indicate a 2% decline in weight compared with the same period of last year. During the month ending Dec. 20, over 2.13 million tons of these goods were imported, which is nearly 200,000 tons more than the current year’s monthly average and 450,000 tons more than the previous month [ended Nov. 20],” the official said.