Tayyebnia: Majority of Iran Transactions in Euro

After Iran ditched the US dollar in its financial reporting and the Central Bank of Iran is pursuing the policy to sideline the greenback in its forex transactions in response to US restrictions, Iran's Economy Minister Ali Tayyebnia said the lion's share of the country's dealings are now conducted with euro.

"At present, a majority of our transactions take place with euro, which has caused a significant decrease in transaction costs compared to the past," Tayyebnia was also quoted as saying by IBENA.

The minister made the statements on the sidelines of the latest joint meeting between the government and private sector representatives, an occasion which served as his valedictory as he is not included in President Hassan Rouhani's Cabinet list announced on Tuesday.  

The Tehran University professor is to be replaced by the head of Iran Customs Administration, Masoud Karbasian, if the latter wins the parliament's approval in the coming days.

Tayyebnia added that banking ties with European lenders are underway using eurozone's single currency while dollar transactions are still problematic as a result of decades-old US sanctions.

The policy of employing euro first gained momentum when CBI Governor Valiollah Seif announced in late January that Iran would stop using the US dollar in its financial and foreign exchange reports as of March 2017.

In early April, CBI emphasized that it has been and will continue to dilute the greenback's role in its foreign exchange basket.

Seif said it would be illogical for the US dollar to be used as the base currency for economic reports since it makes up a meager portion of the country's foreign trade.

"We have to set a currency as the basis of financial reporting, which has better stability and wider use in our foreign trade," he said.

At Monday's meeting, which was held at the Iran Chamber of Commerce, Industries, Mines and Agriculture and attended by ICCIMA chief, Gholamhossein Shafei, Chairman of Majlis Economic Commission Mohammad Reza Pour-Ebrahimi and CBI Vice Governor Akbar Komijani among others, Tayyebnia reviewed the four-year performance of his ministry and weighed in on a variety of subjects.

Challenges & Prospects

Tayyebnia noted that the administration of President Hassan Rouhani has managed to instill a relative stability in the economy and identified botched privatization and high dependence on oil income as the country's major problems that must be tackled.

He stressed that oil is a "generational asset" that when sold, must not be entirely splurged on the current generation.

"Oil revenues should be saved with the National Development Fund of Iran and invested in places that strengthen the role of the private sector in the economy," he said.

The outgoing minister conceded that the Iranian banking system is facing many hurdles, including a stubborn credit crunch, but added that such problems will not be resolved by grandstanding, making baseless criticism and denouncing bank CEOs.

"Increasing the capital of banks is much more important than launching a new project," he said.

Tayyebnia referred to the development of debt market, which has recently gathered pace as the administration has issued bonds to sell its debt.

"The debt market in its current form has been unprecedented in the country. During the fiscal 2015-16, it was worth 100 trillion rials ($2.62 billion) and in 2016-17, it was valued at 280 trillion rials ($7.34 billion)," he said.

"The first priority of the government in entering the bonds market was to finance the private sector."

Tayyebnia said organizing government debts, preventing the pileup of further debts and making up for budget deficits were other reasons behind the debt market move.

The head of the Majlis Economic Commission echoed Tayyebnia on oil, referring to a 10% increase in the share of oil revenues in the annual budget as a negative point.

"However, the increased 1.16 quadrillion rials ($30.4 billion) share of taxes in the 3.46 quadrillion rials ($90.7 billion) budget, which equals about 35%, was a significant achievement realized during the first term of the [Rouhani] administration," Pour-Ebrahimi added.

The ICCIMA chief, on the other hand, spoke of the benefits of these joint meetings that reached 69 in the last four years, saying it provided a constructive channel and created a positive dialogue between the government and the private sector under the chairmanship of Tayyebnia.

However, Shafei also noted that in spite of all efforts by the Economy Ministry, the private sector remains vastly dissatisfied with the progression of divesting government enterprises to the private sector.

Tayyebnia was commended for his distinguished four-year public service at the meeting, which was attended by many private sector members, judiciary officials and lawmakers.