With forex rates at historic highs, the Central Bank of Iran says it has new plans for “managing currency rates”.
"The CBI has new plans in accord with the forex market's current conditions. What is being said on social media is not based on market reality. We urge the people to refrain from taking emotional decisions," Shiva Ravashi, the director of foreign trade said, the CBI website reported.
Currency rates have jumped to historic highs over the past several months as the rial tanks and people seek safe havens to protect what is left of their hard-earned savings.
According to local reports, the US dollar traded at a new high of 486,000 rials on Sunday in Tehran's open market, up 1.8% on the previous day. The Iran Central Exchange website tagged the greenback at 447,600 rials. Melli Exchange and other bank-affiliated moneychangers quoted the dollar at 451,190 rials on Sunday, up 0.11% on the previous day's close.
The euro gained 1.7% and was traded at 501,300 rials. Exchange bureaus sold the European single currency for 481,870 rials, unchanged on the previous day. The UAE dirham gained 5.3% on Sunday and bought 137,300 rials in the unofficial market.
CBI boss Mohammad Reza Farzin last week expressed the hope that some new measures employed by the regulator would help bring down forex rates. But it was not to be.
Farzin told the state-owned broadcaster that the CBI will address the “real demand” for foreign currency. "More than 600 licensed exchange shops and 50 branches of Bank Melli, Bank Mellat, Bank Saderat Iran, Bank Sepah and Tejarat Bank are selling foreign currency."
He blamed "price-gouging" for pushing up currency rates and urged the public to ignore temptations because “they can buy currency at exchange shops and banks at lower prices.”
Last month the CBI said selected banks would sell foreign currency up to €5,000 to each Iranian once a year at rates announced on the Iran Central Exchange (ICE) website.
Up until recently every Iranian could buy $2,000 or equivalent a year at slightly lower rates compared to the unofficial market by presenting their ID. That policy led to long lines of buyers and dealers who then sold it in the open market at higher prices to make an extra buck.
Elaborating on CBI plans for launching a new currency and gold market, Farzin said, "The market was expected to be launched last week, but it was delayed because of some technical issues." He did not elaborate, but said the market would be unveiled soon.
"Once the market is launched we will start offering Quarter Bahar Azadi gold coins in line with plans to curb [rising] prices."
The CBI is planning to use the planned market for currency swap and derivative forex instruments.
The central bank was allowed to launch the ‘Iran Currency and Gold Trade Center’ last week, in line with the new governor's bid to try and control skyrocketing forex and gold prices.
Import Bills
The CBI is set to allocate an estimated $80 billion for importing goods, $60 billion of which is already paid which is 30% higher than the payments in the last fiscal year, Ravashi said.
"Some $14 billion was paid for importing basic goods like wheat and feedstock," she said. "Nearly $3.2 billion was given for importing medicine and raw material for pharmaceutical companies."
The forex were supplied via the Nima market at the average price of 285,000 rials for each dollar, Ravashi added.
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.
In this system, importers declare their currency needs, exporters register their proceeds and banks and authorized moneychangers function as brokers.
Last May the government officially put an end to the costly and controversial currency subsides ($1=42,000 rials), aka as preferential currency, which was given to importers of basic goods.
Soon after businesses argued that with the end of the subsidy policy they would obviously need huge infusions of cash for importing raw material to bridge the gap between subsidized forex and open market rates. They urged the government to reconsider and compensate the liquidity crunch.
Farzin has said plans are underway to expand the role of Nima in supplying the chaotic 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."
Recently Farzin said the government had gained access to a big part of the frozen assets in some countries and was using it to control currency rates. However, despite his claims and those of his predecessor, forex rates have long been of the ascending order and have skyrocketed to historic highs.
