In a bylaw sent to banks and credit institutions, the Central Bank of Iran announced new official rates for foreign currencies.
As per the rule, one euro will be equal to 129,000 rials and the US dollar worth 110,000 rials (or equivalent in other currencies).
Henceforth the official rate will be the benchmark for banks converting forex debts and assets into rials, IBENA reported.
As a matter of policy, the CBI regularly updates parity rates with the national currency to be used by lenders as the basis for their financial statements. The latest conversion rates must be considered by lenders to prepare or revise their financial statements for the current fiscal year that ends on March 20.
The new rates have not changed compared to the previous update last October, indicating that in the view of the regulator forex rates are likely to decline.
This, however, is despite the fact that currency prices in essence are way higher in the open market and the forex trade platform affiliated to the CBI, known locally as Nima.
The Nima market handles currency trade between exporters and importers where rates are slightly lower than in the open market.
Official conversion rates announced by the CBI are about 55% lower than rates at currency market. One dollar on Tuesday bought 240,000 rials at the authorized exchange bureaus affiliated to banks and at Nima it was worth 232,000 rials.
Observers say devalued forex rates would have a negative impact on banks’ balance sheets, and by extension, on the economy hit hard by the US sanctions and the coronavirus pandemic.
Low forex rates will particularly impact the performance of banks listed with the stock market as their forex assets are normally undervalued in their financial reports.
When reviewing the March 2021-22 budget last month lawmakers pushed for raising the official conversion rate in the budget to 175,000 rials to the dollar.
The decision was rejected by the CBI, arguing that "such an official rate is not in the interest of the economy.”
The CBI Governor Abdolnasser Hemmati then argued that the higher parity rate demanded by parliament would, among other things, increase the monetary base and expand money supply. It would also "impact the financial interaction between the government and the central bank.”
Caption: The official rate will be the benchmark for banks converting forex debts and assets into rials.
