Overhaul of Iran's Forex Rules in the Offing

The Central Bank of Iran is to reevaluate and upgrade its rules and general approaches regarding foreign currencies, says the bank's deputy for foreign exchange policies and regulations days after changes were made in regulations concerning foreign currency offered by banks to travelers.

"On the order of central bank's deputy for foreign exchange and in line with increasing transparency, stabilizing regulations, clearing ambiguities, making basic rules compatible and facilitating foreign exchange services to bank customers, foreign exchange regulations are being reviewed," Mehdi Kasraei-Pour was also quoted as saying by the official news website of CBI.

The latest significant change in the foreign exchange workings of banks came on Wednesday when the central bank issued a directive ruling that banks are allowed to "sell travel currency at open market rates starting from September 11".

Banks currently offer foreign currency with a cap of $300 to travelers at official rates that are about 600 rials lower for each dollar compared to the open market rates, meaning that the ceiling for the sale of currency for travel at lower prices is effectively removed.  

Kasraei-Pour noted that experts at CBI's Foreign Exchange Policies and Regulations Department are working to review and update regulations and will ask for the feedback of pundits in the foreign exchange network of banks.

After final reviews are made and banking officials put their seal of approval on the new set of regulations, they will be formally communicated to the banking system "to take a significant step toward improving the climate of doing business in the country".

Improving the nation's business climate has increasingly emerged as a priority across various sectors, especially in light of the World Bank's Doing Business 2017 report that indicated Iran has slightly regressed in improving its entrepreneurial climate following years of lackluster performance.

According to the report, from a total of 190 countries, Iran ranks 120th in the index for ease of doing business and is placed 16th among 25 countries in the Middle East and North Africa region.

According to Kasraei-Pour, the upgrade in foreign exchange regulations will be made in a way that "if the plan to unify the foreign exchange rates is implemented, the new regulations would undergo the least amount of changes".

The central bank has been striving to unify the dual exchange rate regime for years. While it had promised that the official and unofficial rates would be unified by the end of the previous fiscal year in March, the lack of prerequisites such as ties with credible international banks delayed the plan.

Immediately after the administration of President Hassan Rouhani began its second tenure almost a month ago, CBI Governor Valiollah Seif renewed his pledge that the rates will be unified "soon in the new administration".

As Kasraei-Pour outlines, CBI began devising rules pertaining to foreign exchange workings as part of a unified and coherent set in 2002.

That was when policymakers first became serious about unifying the dual exchange rates and decided to prevent policymaking disorder by categorizing all the rules and bringing them under one umbrella.