Head of the Majlis Economic Commission has called on the Central Bank of Iran to end the “traditional ways to control the currency market” and adopt a leading role in the market.
"The government must lead the market rather than being led by the [forex] rates. To do so [CBI] policymakers need to revise the traditional approach in intervening in the market," Mohammad Reza Pourebrahimi told reporters on Monday, way2pay website reported.
"We have to admit that the declining value of the national currency is largely because of structural problems in the economy," Pourebrahimi said. "It is necessary to remove the main distracting factors if we want to strengthen the rial."
Forex rates dropped in Tehran’s unofficial market after months of record highs. The US dollar traded at 494,500 rials on Monday in the open market, down 2.27% on Sunday's close.
The euro lost 2.47% and was quoted at 525,600 rials, the UAE dirham bought 137,200 rials down 2.35% and the GBP finished trade at 593,600 rials, 2.53% lower than the previous day.
Currency rates jumped to historic highs over the past several months with the embattled rial in free fall. Hit by the rapidly deteriorating economic conditions people seek safe havens to protect what is left of their hard-earned savings.
The rial’s slight recovery comes after new power was delegated to the CBI and the establishment of a new trade center for currency and gold known as the Iran Center of Exchange (ICE).
The ‘Council for Coordination of the Three Branches of Government’ this week delegated more authority to the CBI to enable it prop up the rial and stabilize the chaotic forex market.
Heads of the three branches of government (executive, legislature and judiciary) have stressed the need and significance of working in concord to help restore calm to the currency market struggling with skyrocketing rates unseen in the history of the country.
Economy Minister Ehsan Khandouzi said the CBI already has enough power over the work of exchange shops and banks. "The CBI wants extra clout to effectively intervene in the market," Khandouzi said, newswires reported.
"Listed companies' refusal to repatriate their export revenue was among the main concerns of the CBI. Henceforth all listed companies, including those owned by the government such as oil/ gas firms, are obliged to abide by central bank rules for repatriating export revenue."
Fixed Rates Controversial
The MP criticized the CBI and the government for setting fixed rates for foreign currencies noting that setting fixed rates violate the country's regulations. "As per law, the government is required to manage the currency market with floating rates."
He also complained that the government had not informed lawmakers about its plans for fixing the Nima rate at 285,000 rials to the dollar.
"The government needs to move towards a single forex rate system…So far we have several forex rates including those in the free market, Nima rate, Iran Center of Exchange rate and a rate that is used for importing basic goods."
"This shows that our economy is dealing with multiple problems," Pourebrahimi concurred.
According to the parliamentarian the "Majlis is working on a package to the government to help it craft policies compatible with the prevailing conditions of the country," he said.
"We have set a deadline for the government to make decisions for controlling the currency market…otherwise the parliament will take its own supervisory measures." He did not go into details.
The CBI last month unveiled the ICE apparently in the latest bid to control forex and gold prices. Mohammad Reza Farzin, the CBI governor, said, "Rates in this center will be the reference rates based on demand and supply of currency and gold, as well as key economic indicators."
Farzin has said that the CBI will “continue supplying importers of basic goods and medicine with cheaper foreign currency at 280,000 rials to the dollar.”
Nima is an online platform affiliated to the CBI through which exporters sell their overseas income in the form of hawala and companies buy for importing goods, machinery, equipment and raw material.
The central bank had announced earlier that plans are underway to expand the role of Nima in supplying the forex market. "Past policies had deficiencies that must be removed. A big part of forex is supplied via the Nima platform and our ultimate goal is to stabilize rates in this system at or near 285,000 rials to the dollar," Farzin was quoted as saying.
