ICCIMA head Gholmahossein Shafei enumerated the pressing issues like the liquidity crunch, instability and unpredictability of business activity due to the volatility in the currency market and the return of export income as the main challenges of private companies.
“Bank loans have deviated from funding the needs of the production sector in recent years,” he was quoted as saying by ICCIMA website.
“Production sectors, including industries, mine and agriculture, accounted for only 40% of loans last year (2020-21),”the senior business official added, citing CBI data.
“Data has it that manufactures don’t receive a fair share of loans and bank resources have been mainly channeled into speculative activities, which apparently have higher profit margins, offer short-term gains and are less risky”.
He noted that this pattern not only has created financial difficulties for most businesses but also undermined the stability of asset markets.
He criticized the CBI for disregarding rules that oblige the regulator to open “special working capital account” for sustainable access to working capital for industrial, mineral and agriculture sectors, calling the CBI under the new management to heed their long-pending demands.
In his address, Shafei reiterated the paramount need for stability in the currency market as a prerequisite to growth and economic stability.
“Currency market volatility has consequences for all economic sectors, including the government, manufacturers, exporters and the people”.
The private sector “wants the CBI to rise to the occasion to increase forex supply and maintain stability,” he said, highlighting the significance of matter.
With regard to the stringent CBI approach toward repatriation of currency by exporters Shafei recalled the impact of the US sanctions on banks plus the difficultly of money transfer, and noted that the CBI would do better to “offer rewards instead of exerting pressure” on exporters to return their forex income.
He presented the ICCIMA’s proposals to the CBI boss calling for improving the efficiency of currency repatriation rules and meeting the need for currency in a practical and sustainable manner.
The ICCIMA chief reemphasized the need and significance of the independence of the central bank. “So long as the CBI is under the dominance of the government all efforts [for betterment] would be futile,” he said.
Joint Taskforce
Salehabadi said a joint workforce will be formed to find solutions to the ills of the private sector.
The taskforce will comprise representatives from CBI, ICCIMA, the Ministry of Industry and the Customs Administration.
“The taskforce will let the private sector have a say in drafting bylaws and regulations related to currency policy and foreign trade,” the senior banker pledged.
Salehabadi made a positive appraisal of the availability of foreign currency in the past few months and expressed the hope that the positive trend would continue in the next fiscal year.
“The CBI supplied $39.89 billion in the past nine months [March 21-Dec.21]. This is while in the whole of last year the total was $36.48 billion,” he said.
He pointed to the urgency of repatriation of export income to the financial cycle as the government’s high-priority strategy, saying that the CBI will soon announce incentives to encourage exporters to bring their forex income as defined by law.
Exporters complain that they have to sell their currency at lower rates compared to rates in the free market.
Salehabadi pledged that the CBI will adjust the rates. “Foreign exchange rates must not be set in ways that impose loss on exporters. We have worked on facilitative measures in this regard, which will be announced soon”.
Decline in oil exports due to the 2018 US economic blockade have hurt the government’s forex revenue and compelled it to encourage non-oil export as an alternative to oil income in the past three years.
The government says it is trying to promote non-oil export and is committed to removing obstacles. The CBI says given the facilitative rules announced in recent months export activity, and by extension, currency revenue has improved.
Export companies sold $18.1 billion in the secondary forex market, known as Nima, in eight months (March 21-Nov.20). This amount was $10.7 billion in the corresponding period last fiscal year, according to the CBI data.
Nima is an online platform affiliated to the CBI where exporters sell their overseas currency income and companies buy for import.