Central bank governor, Mohammad Reza Farzin, has strongly defended the bank's new move selling the US dollar at 285,000 rials for importing essential goods, saying that it seeks to restore some stability to the tumultuous economic conditions caused by special conditions and political developments.
In an interview Farzin said that the measure also is aimed at stabilizing the forex market that has been adversely affected by fear and uncertainty due to the current economic situation. He did not elaborate.
"We need to restore stability to the market. The economy is still in an acceptable condition even in these difficult times," he was quoted as saying by the Persian-language newspaper Shahrvand.
He tried to explain why the Central Bank of Iran chose the 285,000 rial-tag noting that an optimal exchange rate is one that can contribute to balancing the government budget. "Unlike in the past, the 285,000-rial rate to the dollar should [help] ensure that the government's budget remains balanced and that it does not face problems."
According to the senior banker, "There is still a gap between the exchange rate in this year's budget and the rate we announced.
"There are almost 40 types of foreign currency needs that the people have, such as students abroad, sports federations, and those in need of medical treatment overseas… These are non-essential requirements and their exchange rates will be determined by the market"
Currency rates have 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 CBI decision to fix the dollar at 285,000 rials has been welcomed by some experts who see it as a positive step in the right direction. The policy is expected to create a semblance of stability in the market, which should curb the unending demand for foreign currency.
The governor also clarified that the new policy would not apply to non-essential goods and services and the central bank will continue to let the market determine forex rates for such items.
"There are almost 40 types of foreign currency needs that people have, such as students abroad, sports federations, and those in need of medical treatment overseas. These are non-essential requirements and their exchange rates will be determined by the market," he said.
This is while, the Majlis Economic Commission recently called on the CBI to put an end to the “traditional ways to control the currency market” and adopt a leading role in the chaotic market.
MPs criticized the CBI and the government for setting fixed rates for currencies noting that setting fixed rates violate the law. "The law states clearly that the government must manage the currency market with floating rates," one MP said recently.
Despite the concerns, Farzin expressed confidence in the latest move and urged the people to support it. "We are confident that this policy will help stabilize the forex market and protect the interests of the people. We request the people to cooperate with us in this effort.”
