Economy, Business And Markets

CBI Unmoved About Rising Forex Rates

CBI Unmoved About Rising Forex Rates
CBI Unmoved About Rising Forex Rates
The CBI is working to bring the official and market exchange rates closer, mainly through raising the official exchange rates over the past few months

Foreign exchange rates are real in the market and are rising at a slow pace, says Valiollah Seif, governor of the central bank following the recent swings in the foreign exchange market.  

“Fluctuations in the forex market are momentary; we did see a short-term surge in forex rates last autumn which also was short-lived. Momentary gyrations cannot disturb the market,” he was quoted as saying by during a meeting of the 'Government and Private Sector Dialogue Council' on Tuesday.

The US dollar was traded at 35,900 rials on Tuesday, down from a peak of 36,000 on Saturday which marks the start of the Iranian trading week.  

The Central Bank of Iran has started plans for launching a single foreign exchange rate regime. Iran’s national budget for 2017-18 will be based on unified exchange rates, according to Masoud Nili, President Hassan Rouhani’s senior economic advisor.

The CBI has an eye on reducing fluctuations in the foreign exchange market. It also is working to bring the official and market rates closer, mainly through lifting the official exchange rates over the past few months.

In a related move, the CBI has allowed banks to trade foreign currencies at market rates. Lenders also were given permission to attract deposits in hard currency.

“The surge in economic growth would help promote stability of the forex market,” Seif said.

At the weekend Seif announced that economic growth for the first quarter of the current Iranian year that started in March stood at 5.4%.

Dollar Transactions

The senior banker also referred to the US Treasury's recent guidelines and said: “OFAC clarified a couple of points about the nuclear deal; however, it did not elaborate on issues relating to international banks.”

The guidelines, issued by the US Treasury Department's Office of Foreign Assets Control on Friday, clarify that non-US banks can do dollar trades with Iran, provided those transactions don't pass through financial institutions in the United States.

There are still some restrictions for dollar transactions, he said, but added that this was not a big deal for the country.

The CBI also issued new guidelines this week clarifying domestic banks’ interaction with their foreign peers and businesses.  The bank said it was cognizant of the recent "alleviation of misgivings" about financial dealings with Iran and required banks to compel international entities to meet their commitments vis-à-vis Iran.

SME Loans

Pointing to banking sector’s plan for financing small and medium-sized enterprises Seif said: “About 12,000 SMEs have received at least a part of the money they applied for.”

“Nine trillion rials ($) was paid to the applicants, since the beginning of the Iranian fiscal year,” he said.  An estimated 160 trillion rials ($5.24 billion) is expected to be given to the SMEs.

Earlier on June, the CBI ordered banks and credit institutions to allocate a minimum 10% of their loans to small and medium-sized businesses in a move to help create jobs and lift the beleaguered production sector.

Larger enterprises need to run feasible and sustainable business, in order to qualify for the loans, said the central banker. “Resources of the banking sector should help augment domestic production and borrowers should be able to repay their loans” on time.


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