Mohammad Reza Farzin, the governor of the Central Bank of Iran, has warned exporters who have failed to return their forex earnings and said a special committee set up at the CBI is investigating the delays.
Addressing the parliament on Tuesday, Farzin added that many exporters had repatriated their foreign revenue. "Last year, $65 billion was paid [for imports], which reflects the return of export revenue. Most of the forex came from the petrochemical and steel industries while other sectors also performed reasonably well. However, there have been breaches of [repatriation] agreements," IBENA quoted him as saying.
Regulations oblige petrochemical exporters to return at least 60% of their revenue through Nima, the platform where exporters sell their currency earnings to importers of non-essential goods, whereas non-petrochemical exporters must return 50% of their currency. Exporters are required to sell 20% of their income in cash to money changers. The balance can be used for importing goods either by the exporting firms or third parties.
When asked by a MP why should producers be obliged to sell their foreign currency to the central bank, Farzin said, "Ask the producers if they buy/import raw material at free market forex rates…Moreover, what rates they pay for electricity, water and gas? There is absolutely no reason why they should sell their currency in the free [black] market at higher rates. It is devoid of economic logic."
Almost all industries in Iran have access to heavily subsidized energy – a key issue that has long been controversial and often censured by prominent economists and analysts advocating free-market enterprise.
"We established the Iran Currency Exchange to determine the exchange rate and meet currency needs. "Now the problem is the unreal signs [inflated forex rates] conveyed to the market from unofficial sources."
According to the CBI boss, the bank has informational advantage and has entered most markets to curb the negative influence of higher rates. “We are trying to reduce the rates and do not recognize the [high] exchange rates. We believe that it should decrease.”
New measures by the CBI is in line with government efforts to stabilize the forex market, which has been shaken by unprecedented high rates for years.
Backdoor Deals
Farzin said the CBI will begin buying and selling foreign currency directly to eliminate backdoor deals. This move comes amid reports that some people and companies are involved in illegal forex deals.
"Although this is not widespread, there are reports of some individuals and companies dealing in currency through backdoor channels," the governor said in response to a question from a parliamentarian.
"For this reason, the central bank will directly buy and sell foreign currency to eliminate intermediaries and get a better grasp of market developments and prevent abuse." He did not elaborate.
Last week the CBI stopped allocating forex to importers who buy currency from the free market before applying for foreign currency at cheaper prices.
"CBI policy is to curb the unofficial currency market…purchasing forex from the open [unofficial] market is no longer permissible for those who seek access to the CBI's cheaper currency resources…Dealing in and with unofficial markets is akin to money-laundering and harms the economy," Farzin said in a tweet.
It has been reported that some importers buy foreign currency from the CBI at lower prices only to sell it in the black market at higher rates.
Last month the CBI issued a warning about selling currency outside official channels and at prices higher than the authorized exchange rates. It said some exchange shops and exporters had ignored regulations and sold currency outside the official framework at exorbitant rates.
De-Dollarization
The senior banker also stressed that dedollarization is high on the CBI agenda. To this end, Tehran will host the Asian Clearing Union summit in June from June 2-4 with the participation of nine member countries and central bank governors from regional nations.
"The highlight of the meeting will be three topics: bilateral and multilateral currency agreements, cross-border payments, and direct currency swaps," the governor said. "We have been negotiating with several countries regarding bilateral currency agreements and are close to completing the process."
He was hopeful that agreements with other central banks can be reached during the summit.
