A total of 17.46 million tons of essential goods worth $8.76 billion were discharged from Iranian customs offices during the nine months to Dec. 20, according to Rouhollah Latifi, the spokesperson of the Islamic Republic of Iran Customs Administration.
Overall imports stood at over 25 million tons during the same period, of which 70% constituted 25 groups of essential goods, he added.
A total of $26.8 billion worth of goods were imported into Iran during the period.
Also known as necessity goods, essential goods are products consumers will buy, regardless of changes in income levels.
“Five essential items, namely corn, barley, oilseeds, raw oil and soybean meal, were subsidized imports weighing 12.29 million tons worth $4.14 billion. They accounted for 49% of country’s total imports and 70.5% of all essential goods imports in terms of weight,” he was quoted as saying by IRNA.
Corn imports, the top subsidized commodity, reached 7.24 million tons worth $1.77 billion during the period under review. It was followed by 1.84 million tons of oilseeds worth $949.75 million; 756,121 tons of raw oil worth $627.86 million; 1.1 million tons of soybean meal worth $461.74 million; and 1.34 million tons of barley worth $326.83 million.
other essential goods imported during the period were pharmaceuticals and medical equipment worth $1.23 billion; rice worth $707.87 million; wheat worth $696.51 million; raw sugar worth $357.23 million; manufacturing machinery worth $327.27 million; dried tea worth $221.18 million; heavy duty tires worth $206.24 million; and paper pulp worth $144.25 million.
According to Latifi, print paper worth $142.6 million; fertilizers worth $123.78 million; pulses worth $111.36 million; frozen red meat worth $104.73 million; pesticides worth $58.43 million; livestock pharmaceuticals worth $47.02 million; butter worth $38.47 million; fresh red meat worth $28.61 million; and chicken worth $203,408 were the rest of essential imports during the period under review.
March 20-Dec. 20 imports of essential goods indicate a 2% decline in weight compared with the same period of last year. During the one-month period to Dec. 20, over 2.13 million tons of these goods were imported, nearly 200,000 tons more than the current year’s monthly average and 450,000 tons more than the previous month (ended Nov. 20).”
Commission Votes for Raising Subsidy Forex Rate
The Joint Commission of Iranian Parliament has decided to change the exchange rate for importing essential goods from 42,000 rials to 175,000 rials per dollar, suggesting that the prices of essential imports would be set in accordance with the exchange rates of the so-called secondary FX market, known by its Persian name Nima.
The real market price of the US dollar is about 60% higher.
According to Rahim Zare’, the spokesperson of the commission, the move is aimed at unifying the exchange rates and preventing the supply of imports at free market rate by importers and fighting rent-seeking and corrupt practices.
“Importers used to sell their products at prices determined by the free market despite the government’s allocation of subsidized forex at the rate of 42,000 rials per US dollar,” he was quoted as saying by IRNA.
The government’s revenues are projected to increase by 400 trillion rials ($1.6 billion) provided that the commission’s proposal is approved by the parliament during its open sessions.
Majlis Joint Commission, composed of representatives of all specialized parliamentary commissions, is responsible for reviewing budget bills as well as five-year development plans proposed by the government before they are put to a vote by MPs.
Decline in Essential Goods Imports
Imports of all essential goods, except corn, declined this year compared with last year, Domestic Commerce Commission of Iran Chamber of Commerce, Industries, Mines and Agriculture reported, citing figures released by the Central Bank of Iran.
Over nine months to Dec. 20, the central bank paid under $4.42 billion at the exchange rate of 42,000 rials per US dollar for the supply of essential goods, registering a 41% decline compared with the corresponding period of last year, Ashraf Mortezaie, an expert with the commission, said.
“Import order registration for essential goods stood at $12.24 billion during the nine-month period, posting a 17% year-on-year decline. Since the beginning of the current Iranian year (March 20, 2020) to Dec. 20, a total of $9.25 billion have been allocated for essential goods, which is $500 million less than last year’s similar period,” she added.
“The value of discharged essential goods stood at $6.23 billion in the nine months to Dec. 20, indicating a 30% drop compared with $8.9 billion of last year’s same period.”
Commenting on the five essential goods that have the highest impact on households’ livelihoods, namely corn, soybean meal, unprocessed oil, oilseeds and barley, Mortezaie said, “These items accounted for half the value of subsidized currency allocated for the import of essential goods during the period, which shows a 5% decrease YOY.”
“The government planned to allocate $6.4 billion to import these five items during the fiscal 2020-21. By Dec. 20, a total of $4.75 billion were allocated and $4.3 billion were paid, suggesting that the government has to pay the remaining sum of $2.1 billion by March 20, 2021,” Otaghiranonline.ir quoted her as saying.
According to the official, over $3.08 billion were provided for the import of corn, soybean meal and barley in the nine-month period, showing a 14% YOY decline.
“Prices of raw oil and oilseeds and, accordingly, vegetable oils saw a 15-25% growth in the current year. Over the last nine months, 702,000 tons of raw oil worth $559 million were discharged from customs. Imports of oilseeds stood at 1.7 million tons worth $807 million, indicating a 15% rise in weight but 7% decline in value YOY. Altogether, customs clearance of oilseeds and raw oil imports indicates a decline of 22% in weight and 7% in value YOY.”
According to members of Domestic Commerce Commission of ICCIMA, challenges facing the provision of essential goods in the next fiscal year (March 2021-22) include government intervention, misguided policies regarding market regulation, hurdles in the way of timely allocation of foreign exchange, lack of transparency about the country’s strategic reserves, barriers facing transfer of currency, inflation and decrease in demand due to the shrinkage in people’s purchasing power, and problems regarding production as a result of the burgeoning money supply.
As per the budget bill for the next year (March 2021-22), the government will provide $8 billion for provision of essential goods. But the correlation between the sum of allocated forex and the exchange rate has not been stated and the budget fails to indicate how long the government would keep the cheap imports policy.
On the other hand, there is not enough transparency regarding subsidized forex allocation and pricing. The level of essential goods reserves by March 20, 2021, and the next year has not been specified.
Furthermore, imports of essential goods and market regulation policies as well as government’s policies to protect and promote the economic wellbeing of households are ambiguous.
Kaveh Zargaran, the chairman of the commission and the secretary of the Federation of Iranian Food Associations, believes that the government is likely to rid itself of subsidized import policy completely by the end of the year (March 20) given the Minister of Industries, Mining and Trade Alireza Razm-Hosseini’s approach.
“As such, prices will rise to some extent and demand will decline and a relative recession will come eventually. Food and related industries are likely to experience a relative recession by the end of the year and the beginning of the new Iranian year,” he said.
“The flow of imports has all but stopped by the importers of raw materials and essential goods who are unwilling to take risks, given the pressure of sanctions and the state of government budget and the central bank,” the industries minister recently said.
“As the representatives of producers and economic operators, the Ministry of Industries, Mining and trade is looking for a unified foreign currency exchange rate. Today we are anticipating that the parliament might take a revolutionary decision in this regard.”
