EGFI to Start Forex Hedging in a Month

Export Guarantee Fund of Iran, the state-owned export credit agency, will start offering insurance coverage for fluctuations in foreign exchange rates, mainly to support Iranian exporters, said a board member of the fund.

“The government’s economic commission has approved our proposal for offering forex hedging. The Cabinet should also approve the proposal, which would materialize within a month,” Banker.ir also quoted Arash Shahraini as saying on Saturday.

Shahraini noted that the coverage will first be offered for fluctuations of major currencies like the US dollar and euro against rial. 

“We would next offer a forex hedge for currencies of emerging markets.”

A foreign exchange hedge transfers the forex risk from the trading or investing company to the entity that carries the risk, such as a bank. There is cost to the company for setting up a hedge. 

By setting up a hedge, the company also forgoes any profit if the movement in the exchange rate becomes favorable.

Shahraini said EGFI also expects to receive the government’s approval for offering insurance coverage for export-oriented projects. 

“The plan aims to cover risks of investments in major projects like petrochemical industry, which can multiply Iran’s export volume,” he said, adding that this is expected to help boost Iran’s non-oil exports.

According to the latest report released by the Islamic Republic of Iran Customs Administration, 81.76 million tons of goods worth $28.11 billion were exported during the eight-month period starting March 20, registering a 5.74% rise in value compared with last year's corresponding period. 

Gas condensates were Iran's main export ($4.51 billion) in the non-oil category, accounting for 16.7% of total exports. They were followed by liquefied natural gases ($1.95 billion), light crude oil and its derivatives, excluding gasoline ($1.57 billion), petroleum gases and liquefied hydrocarbons ($960 million) and liquefied propane ($763 million).