Iran Private Sector Opposes Forex Rate in Budget

The head of Tehran Chamber of Commerce, Industries, Mines and Agriculture, as one of the leading private sector figures, has added his voice to the chorus of people criticizing the proposal to set the US dollar rate at 35,000 rials in the fiscal 2018-19 budget.

President Hassan Rouhani recently submitted the budget to the parliament and decided on the aforementioned rate for the greenback that is currently being traded in the Iranian open market at 42,000 rials. 

That has prompted TCCIM chief, Masoud Khansari, to reiterate his support for managed floating rates and say the proposed USD rate is in contrast with the real rates of the currency in the domestic market, IBENA reported.

"The 7,000-rial discrepancy between the official and market rates of the US dollar will create a variety of problems for traders and exporters," he said, stressing that "we must move toward unifying the foreign exchange rates".

The government is gradually trying to reconcile official and market rates, and has consistently increased the official rate in the past few months. The official rate of the US dollar currently stands at 35,590 rials, which is still significantly far from free market rates.           

According to Khansari, “the private sector stresses that the discrepancy between local and foreign inflation rates must be used as the basis of calculating greenback rates”.

Valiollah Seif, the governor of the Central Bank of Iran, has said the rise in USD prices in recent months is due to Christmas, meaning that the greenback will fall back down after the Christian holiday season is over.

“We must consider that the USD rates in the free market are not naturally 42,000 rials and will be balanced in the near future,” Seif recently said in a press conference.

Khansari said the capping of bank interest rates at 15% has already exerted a positive impact on the capital and housing markets, adding that the private sector hopes the central bank will remain committed to its promises of further cutting interest rates and controlling illegal credit institutions that drove up the rates.