Every once in a while, talks about a motion or a bill to increase the Central Bank of Iran’s authority circulate in the media. This means that the ruling establishment is aware of the need for a more powerful and independent central bank. But the question is why in all such motions and bills, the CBI is given authority over private legal and natural persons?
Is it because private legal entities such as importers, exporters, the banks and the exchange offices believe CBI does not have the authority and independence? Have the powers and authorities of the central bank been threatened by those people? Or what the CBI needs is authority and independence before the interference of the government, the parliament, special commissions and committees consisting of various state bodies, and in short, independence vs the government?
Hamid Qanbari, a senior central banking expert, opened an article for the Persian economic daily Donya-e-Eqtesad with these questions. A translation of the full text follows:
To find the right solution to a problem, it is important to first identify its dimensions and roots and then find the proper solution. A look at the problems facing CBI in recent years, especially in relation to the management of the currency market, shows where to look for the root cause of the problems.
In the fiscal 2018-19, government intervention in fixing the exchange rate, contrary to the clear specification of the law on permanent decrees, which stipulated the managed floating system, caused problems for the central bank in fixing the exchange rate for several years.
Government intervention in the management of the foreign exchange market, carried out with whatever purpose and motive was a non-expert action in a specialized matter that was the responsibility of the central bank, and its ill effects have not disappeared from the economy to date.
In the following years, the parliament’s intervention in CBI’s foreign exchange powers and determining the rate (or the rate range) of the CBI’s currency purchase and sale, pointing to the need to provide currency at the preferential rate and other cases by including articles in the annual budget law, created numerous problems for the management of the currency market.
In the past few years, CBI at different levels - from the governor to the deputy in charge of foreign exchange and those of lower tiers - have been involved in numerous lawsuits in judicial and criminal courts, including in the Revolutionary Court, to provide explanations about their policies and convince the judicial system that those measures were correct and in the interest of the economy and the currency market.
To wrap it up, it is true that the CBI does not have enough independence and authority, and measures should be taken to restore the same to the bank. But these measures should not give the central bank more authority over exporters, importers, traders and other legal entities. The authority of CBI has been limited by state organizations and institutions.
Various commissions and committees that make decisions about foreign exchange issues and their decisions present the central bank with a fait accompli; institutions and ministries that make decisions about commercial issues that have an undeniable direct impact on the foreign exchange market limit its authority to make decisions and manage the currency market, in addition to ministries that pass various approvals from different authorities and obligate the central bank to take measures that it does not accept from the expert point of view. These factors limit the powers and authority of CBI and not that of some exporter or some importer.
What has been said does not mean that the central bank does not need to have powers before currency market players. The main problem is the interference of government and state bodies in the specialized affairs of the central bank. Therefore, if a motion or a bill is presented to increase the powers of CBI, the first and most important point that should be considered is to limit government interventions in the legal powers of the Central Bank.
