Economy, Business And Markets

MP Cautions Gov’t On Forex Issues

MP Cautions Gov’t On Forex IssuesMP Cautions Gov’t On Forex Issues

Control over foreign exchange by the government, as the main holder of hard currency reserves, has impeded the setting up of a forex bourse in Iran, a member of the Majlis Economic Commission said Saturday.

“As long as the government is the main provider of foreign exchange, opening a currency bourse would be a gargantuan task with many obstacles, IRNA quoted Iraj Nadimi as saying.

Noting that foreign exchange can either be made available by the government or have foreign origin, he warned that the government should avoid selling foreign exchange on the cheap “or else a budget deficit would be inevitable.”

According to senior lawmaker, the country is already facing a budget deficit and if the government seeks to sell foreign exchange at lower prices problems would increase.  “Market policies need to be in line with the interests of the manufacturers and consumers,” he asserted referring to increasing voices among senior members of the government regarding the need for promoting a “market economy” and moving from the unsuccessful centralized system of the past three decades that they say failed to deliver and produced layers of corruption.

About currencies from outside (non-government) resources, he believes non-state and private institutions that are authorized to sell forex earnings should be monitored closely. “Improving transparency and oversight of the bureaus de change can and will prevent rent-seeking,” he said without wanting to use the word corruption, graft and insider trading related to forex earnings.

It is “unfair” to offer goods at a variety of exchange rates, the MP opined. Yet, pointing to the probability of introducing the oft mentioned ‘unified exchange rate’ system, he said such a system is more or less in place in the country “since the market is not the main parameter that determines the foreign exchange rate.”

“To the best of our ability we are trying to free the economy from centralized control,” he said, adding once this is achieved, everything would fall under market mechanisms and competition. However, Nadimi said as long as the command economy exists, key decisions need to be taken with the intent of preventing and discouraging rent-seeking. “It (decisions) must be such that do not encourage those with close proximity to wealth and power to add to their windfall profits.”