Economy, Business And Markets

Market Edging Closer to Unified Forex Rates

Market Edging Closer  to Unified Forex Rates Market Edging Closer  to Unified Forex Rates

The Minister of Economic Affairs and Finance says the market is currently "quite close" to a unified foreign exchange regime, noting that currently there is barely any difference between the official and free market forex rates.

Ali Tayyebnia made the remarks at a gathering to help promote government and private sector relations held at the Iran Chamber of Commerce, Industries, and Mines late Monday, IRNA reported.

"Our perception of an appropriate exchange rate system is one which is commensurate with the capabilities of manufacturing units to import intermediate goods," the minister noted.

Foreign exchange rates experienced turmoil in the past week with the US dollar gaining big gains against the rial. Government officials said high demand for the greenback for travel and a plunge in oil prices were the main reasons, but market observers suspect government intervention in the currency market. The market saw some stability later in the week with the dollar being exchanged below 34,000 rials.

Market fluctuations widened the gap between the official exchange rate for dollar and the so-called free market rate, dashing hopes of the government to adopt a unified exchange rate system anytime in the near future.   

Tayyebnia, a staunch free market advocate, said the government has committed itself to curbing the inflation but more importantly is taking measures to pull the economy out of recession in the second half of the current Iranian year (started March 21).

"Pushing for a law to eliminate barriers to competitiveness in production, which was passed by the Majlis, is one such measure," said the minister, adding that implementing the law would depend on certain budgetary provisions.

"Currently, market expectations about sanctions relief have put us in an awkward situation," he said, noting that in the post-sanctions era, the government will definitely put in place a unified foreign exchange system.

Elsewhere the minister referred to the financial restraints that have enormously affected the state budget and said, "Financial constraints are the result of slumping oil revenues since the second half of the previous year."

No Forex Manipulation

Also on Tuesday, the Central Bank of Iran rejected claims that it had manipulated forex rates to pay monthly cash subsidies to the millions of


Akbar Komijani, CBI  vice-governor said the recent increase in foreign exchange rates was due to other reasons, like increase in demand for foreign currencies in the summer (for overseas travel), the hajj season and steep decline in international oil prices.

New Loans

Komijani said the Money and Credit Council at its next meeting will discuss new loans to help stimulate the durable industrial goods market like cars and home appliances.

On marriage loans, he said previously some of the commercial banks were not linked to the network designed for paying such loans. All commercial banks have now joined the system and he hoped lenders would start offering loans in the near future.

The central bank has been criticized for falling short of earlier promises to provide free-interest loans to newlyweds. The bank has also decreased the ceiling of marriage loans to 30 million rials ($882 at market rate) from the previous 50 million rials ($1,447).

Defending the performance of banks, Komijani said, "The resources [for paying marriage loans] are limited and the capabilities of banks need to be considered in paying such loans," adding that the CBI has plans to meet the demand of all applicants.

Referring to the deadline for bureaux de change to renew their permits, a measure that would tighten CBI supervision of bureaus de exchange, Komijani said although the deadline has expired, the CBI is making every effort to make it possible for the money changers to register with the regulator.

"They [the bureaux de exchange] would, however, need to fill the required forms, gather the documents and maintain effective interaction with the CBI."