Businesses Renew Call for Unified Currency Rates

As the administration of President Hassan Rouhani is preparing the stage for deeper economic reforms in its second term (due to start in mid-summer), private sector leaders are taking it to task for failing to fulfill the key promise of scrapping the dual foreign exchange rate regime.    

In their latest comments, some senior Chamber of Commerce officials have repeated calls for forex rate unification, expressing concern that the issue may be overshadowed by other controversies such as the splitting of ministries that had been merged under former president Mahmoud Ahmadinejad.

"Measures undertaken by the government have created the necessary requirements for unifying forex rates. It is obvious that the private sector also has higher expectations now because we actually have no option but to unify the rates," Mehdi Jahangiri, vice-president of Tehran Chamber of Commerce, Industries, Mines and Agriculture said in comment published on the TCCIMA news website.

The official referred to foreign exchange controls by decree as one of the major problems.

Noting that such controls and restrictions "have not worked in any country and will not work in Iran", he said currency rates should be the function of market dynamics.

While many officials, including Central Bank of Iran Governor Valiollah Seif had initially promised that rate unification would be realized by the end of the previous fiscal in March, that has not materialized yet due to what officials say are "unfulfilled conditions."

Jahangiri spoke about the government's proposal to break up three ministries, saying the administration would do better with deeper feedback from experts because "I believe no such analysis was conducted in the initial merging and it was a rather emotional decision".

Pedram Soltani, deputy director of the Iran Chamber of Commerce, also stressed the importance of unifying the dual forex rates, detailing conditions under which it can and will become possible.

He says there are two kinds of currencies: one held by the CBI and which has limited use, and the currency traded in the parallel market.

He says the free market foreign exchange belongs to exporters and importers and can be traded in various countries with more flexibility.

If banking ties are expanded so that the CBI can be able to transfer hard currency under the auspices of the free market, "it is at that time that rates can become unified. Then we will have the ability to defend the unified rates and the market rates would not be different from the official rates".

Seyyed Hossein Salimi, deputy director of the Money and Capital Market Commission with the TCCIMA also spoke of the currency rates, referring to unification of the dual exchange rate system as among the issues the Rouhani  administration was unable to resolve during its first term.

However, pointing out that during Ahmadinejad's tenure the national currency lost 70% of its value almost overnight, Salimi commended the fact that in spite of all the challenges, "exchange rates were balanced and as the law states, fluctuations in the rates were in line with the inflation rate".

Iran has two exchange rates. The official CBI rate was fixed at 32,469 rials on Saturday for the greenback and the rate was 37,350 in the free market.

The CBI has succeeded to narrow the gap between the official foreign exchange and free market rates as their difference stood at 18% in February.