Economy, Business And Markets

Tayyebnia’s Forex Posture Unclear

Tayyebnia’s Forex Posture Unclear
Tayyebnia’s Forex Posture Unclear

In the annual Public-Private Sectors Dialogue Council held this month Economy Minister Ali Tayyebnia made some ambiguous remarks on the extent of the government’s role in setting foreign exchange rates.

“Foreign exchange rates are determined by supply and demand, and any intervention by the Central Bank of Iran to regulate foreign exchange rates would merely be through market mechanisms,” he said.

The official exchange rate of the US dollar in the 2016-17 budget is not a prediction for forex market in the coming year but it is a calculated number to balance the budget, he said.

On the issue of forex rates and its impact on export and domestic production, he said, “foreign exchange rates should be set in a way as not to undermine exports and domestic production.”  

The government has announced the official rate of the greenback at 29,970 rials ($0.99290) for the 2016-17 fiscal budget -- something that has provoked strong opposition from businesses and economic experts who insist the greenback is actually worth much more. The experts argue this lower rate will harm the country’s exports and domestic production units, reported.

According to Tayyebnia, the government is not interested in setting forex rates by decree nor is it willing to allow rates that would hurt exports and manufacturing units that already are under pressure due to the long recession.

However, contrary to his previous remarks he stated that the government wants to lower the inflation rate to below 10% and to achieve this all the nominal variables including interest rates, income growth rate and forex rates should be reduced. All this demands the state’s direct intervention in the markets including the forex market, leaving Tayyebnia’s claims and other officials insisting on the government maintaining a hands-off approach in the forex market open to question.