Economy, Business And Markets

Support for Currency Deals With Neighbors

Support for Currency Deals With Neighbors
Support for Currency Deals With Neighbors

An expert has supported the currency swap agreements the Iranian government has recently signed with several neighboring countries, arguing that they would benefit the national economy.

Last week the Central Bank of Iran announced it reached agreements with central banks of Turkey, Iraq and Russia to eliminate the US dollar and euro as intermediary currencies and use local currencies instead, a move that was bitterly criticized by some experts namely Majid Reza Hariri, head of the Iran Chamber of Commerce’s import committee.

Critics believe as Iran’s exports to the three countries significantly exceed its imports from those nations, the extra revenue Iranian traders earn is in “uncommon” currencies that must be converted to other major currencies, a process that seems to be disadvantageous for the Iranian side.

Critics also argue that a currency deal could be beneficial only if trade is balanced.

Mohammad Navid-Adham, however, has defended such currency agreements. “Having a balanced trade is not necessarily a must for such agreements to become beneficial, since the deals are regarded only as a complementary instrument for trade, and not a substitution for other tools.”

In fact, he added, the new deals won’t lay away the previous payment options; instead, they aim to use a variety of payment options, ISNA reported him as saying on Monday.

In addition, under the currency swap agreements, the surplus exports are calculated in dollar or euro, and not in local currencies, the expert noted. “For instance, if Iran imports 1000 units from Pakistan and exports 700 units in return, up to 700 units will be traded using local currencies and the rest will be calculated based on their dollar-value.”

He further said that such currency swap agreements will help the local currencies be introduced worldwide. “As the East Asian countries are increasing the number of their currency deals, Iran will have to join this global trend, which would help its currency to be better known in international markets,” he concluded.