Lawmakers have voiced support for the Central Bank of Iran following the latter’s move to implement new restrictions on the allocation of cheaper foreign currency.
The CBI last week implemented new measures to limit the amount of forex Iranians can buy and also raised the rates.
Per law, every Iranian can buy a fixed amount of foreign currency at slightly lower rates compared to the open market by presenting their ID. The rule led to long lines of buyers who then sold it in the open market at higher prices to make an extra buck.
The CBI now says it has “thoroughly studied the flaws” in the former policy. It said moneychangers and banks can henceforth sell currency only up to €2,000 to each Iranian in one year, lowering the cap from €5,000 that it had announced in the not too distant past.
Two months ago the CBI said selected banks could sell currency up to €5,000 to each Iranian a year at rates announced on the Iran Central Exchange (ICE) website.
Later it said buyers of the so-called “cheaper” currencies must have a forex bank account with domestic financial institutions, requiring moneychangers to transfer the sum to those accounts. Besides, buyers are obliged to have at least $100 or €100 in their accounts for at least six months, otherwise they are not eligible to buy currency.
The measure apparently is to prevent middlemen from using the ID cards of the poor and homeless and use them as money mules.
Moreover, the measure is likely to help revive foreign currency accounts in the banking system. Such accounts were popular among the public until late 2010s, when the government required banks to pay back the forex deposits' equivalent in Iranian rials, rather than the currency put up by the accountholders.
Since then various policies came into force to attract people's trust into forex accounts but mostly flopped.
Forex accounts will also help raise the transparency of financial transactions, the CBI said without elaboration.
The regulator has also set another restriction for buyers of currency per which they must wait for one full year before they can make new purchases. Formerly, buyers could make a purchase once in every fiscal year.
There also are reports about the possibility of cutting the allocation of cash subsidies for those who buy the cheaper foreign currencies. Policymakers say those who can afford to buy €2,000 a year are affluent enough to be removed from the list of cash subsidy given to the economically less privileged.
Ali Bahadori Jahromi, the government spokesman, recently said that purchasing cheap currency will be reconsidered as a criterion for assessing a household’s financial status, and consequently their eligibility for receiving cash subsidies.
Currency rates have scaled to historic highs over the past several weeks as the rial tanks and people hunt for safe havens to protect what is left of their hard-earned savings.
CBI officials have blamed "price-manipulating cliques" for jacking up exchange rates in the market and urged the public to ignore them, as they can purchase their needed currency at exchange shops or banks at lower prices.
In another update last week, the CBI announced that the Iranian Center for Exchange (ICE) listed the Quarter Bahar Azadi gold coin as the first to be traded at prices announced on ICE's website, which is deemed to be lower than the free market.
The US dollar traded at 505,500 rials on Friday in the open market. The euro was down 0.63% and was quoted at 551,400 rials, the UAE dirham bought 140,300 rials and the GBP ended at 627,600 rials.
Removing Middlemen
Parliamentarians have welcomed CBI measures to better manage foreign currency resources, including changes to the conditions for receiving currency with an ID card. Shahbaz Hassanpour Biglari, a member of the Majlis Economic Commission, backed the new policies saying “it will help curb rent-seeking in the chaotic currency market.
He also said that the responsibility for monitoring the country's monetary, banking, and foreign exchange market lies with the central bank and collaboration of all state authorities is key to achieve CBI targets.
Mohammad Reza Pour Ebrahimi, the head of the Economic Commission commented on the issue saying that the biggest challenge facing the economy is the unending fluctuation in forex rates.
He added that “regardless of whether the rates rise or fall, such fluctuations hurt the struggling production sector and the decision-making process.” However, with reforms in CBI policies, he hoped to see a more stable market in the future. The aim of policy reform is to get rid of the army of middlemen in the currency market and in the interest of the people, he was quoted as saying.
Ali Rezaei, also a member of the same commission, commented on the new measures, stating that efficiently managing currency resources can “help control and curb inflation.” If the new CBI policies in better managing forex market are successful, the outcome will eventually benefit the people, he noted.
