The widening gap between the bid prices of foreign currency and their purchase in the secondary forex market could undermine the export sector growth, head of Iran Export Confederation said.
Currently the price gap is near 9,000 rials in this market, locally known as Nima, with buy prices being lower, according to Mohammad Lahuti.
“This means that exporters have to sell their overseas earnings cheaper,” he wrote in a Tweet Saturday.
Nima is an online platform affiliated with Central Bank of Iran where exporters sell their currency and companies buy it for importing non-essential goods, machinery, equipment and raw material. Nima rates are usually below open market rates.
While currency prices in the secondary market have moved upwards in the past year, exporters now complain about the compulsion to buy currency at higher rates and sell their export earnings cheaper.
Each dollar bought 139,500 rials in the secondary market and sold for 147,950 rials on Saturday, according to secondary market online data.
“Export experience of successful countries shows their governments employ mechanisms to buy export earnings at higher rates,” Lahuti tweeted.
“Now, how should we expect to boost exports with this policy?” he asked, addressing policymakers and trade officials in Tehran.
The government tightened rules on repatriating currency by non-oil exporters in the spring of 2019 after the United Sates imposed new sanctions on Iran’s oil, banking and shipping industries.
With oil exports getting more difficult as time passes, the government has shifted its focus on the non-oil export and engineering export. It has urged companies to improve competitiveness and shift focus on international markets, particularly in the neighborhood.
Meeting forex repatriation commitments has become a matter of hot debate between the central bank and export firms.
The debate relates to the Iran National Tax Administration’s incentives based on which exporters can refund their VAT one month after they repatriate 70% of their earnings.
On the one hand, exporters complain that they are unable to fully repatriate their earnings due to restrictions on transfer of money. On the other, the CBI is disappointed with the amount of repatriated earnings, claiming it is not enough and does little to ease the difficult economic conditions.
Exporters argue that they need liquidity to keep going and blame INTA for blocking their money.
Nima Rates Jump
Currency rates jumped 58.5% in the last calendar month to April 19 in the secondary forex market compared to the same month last year, according to a report by Tehran Chamber of Commerce, Industries, Mines and Agriculture.
One dollar sold for 139,930 rials on average during the month -- up over 88,280 rials in the corresponding period last year.
The higher rates, however, were attributed also to declining trade and mounting pressure from the supply side.
This is attributed to the CBI’s new policies calling for less intervention in the market and creating more space for export companies.
It appears the CBI is exercising extra caution and has reduced currency offers on Nima due to uncertainty arising from the coronavirus spread across the world and collapsing international oil prices.
As per CBI regulations, export companies must sell at least half their earnings in the secondary market. Petrochemical exporters need to bring back at least 60% of their overseas earnings and sell it via Nima.
Exporters are also obliged to sell at least 20% of the total proceeds in cash to authorized moneychangers. The balance can be used to import goods, machinery and equipment either by the exporter or other third parties.
