As markets await the government’s new foreign exchange plan to combat the intense volatility, speculation about the contents of the package abounds.
Mohammad Reza Pour-Ebrahimi, chairman of Majlis Economic Commission, said on Tuesday the new forex package would be implemented within 48 hours, meaning that the scheme could be officially kicked off on Thursday.
Pour-Ebrahimi, who has been a vocal critic of the government’s forex policy, noted after his commission’s meeting with Economy Minister Massoud Karbasian that “new cooperation” has formed between the parliament and the government.
“After nearly three months since the implementation of wrong currency policies, agreements have been reached and negotiations have been held with the new central bank governor in the past two days so that the new currency policies are implemented in a specialized manner,” he said.
Pour-Ebrahimi had in the past threatened that if the government fails to change its foreign exchange policy, the parliament would introduce its own legislation.
The government decided to unify the US dollar’s exchange rate at 42,000 rials on April 9 in response to volatility that saw the rial sink to all-time lows against the greenback.
At the time, it also banned the physical trade of hard currency by exchange shops and the trading of US dollar at any rate other than the official rate.
However, after a deluge of demand for imports at the attractive unified rate, the government had to allow limited forex trade through a secondary market at “negotiated rates” between exporters and importers of similar small-scale goods.
Tasnim News Agency reported on Wednesday that the new forex measures would probably include the expansion of the secondary forex market, which had also been suggested by several media sources.
According to such reports, petrochemicals and mineral companies will allocate 20% of their export earnings to development projects, probably at cheap rates and sell 20% to their hard currency at the secondary market at open market rates.
These firms, which account for the biggest portion of non-oil export earnings, will have to offer the remaining 60% of their resources to the secondary market at the rate of 55,000 rials.
According to some analysts, if the government opts for such a package, even as it helps expand the secondary market, it would be a far cry from the turnaround expected by investors.
Pundits, lawmakers and major private sector figures have opined that more government control in the forex market would only result in more turbulence as it chokes off the free flow of trade.
Ahead of the package release, the rial strengthened in the unofficial forex market against most currencies on Wednesday.
The US dollar’s exchange rate continued to stay in the range of 105,000 rials and lower than Tuesday’s rate. The bourse also continued its rally on Wednesday amid expectations that the petrochemical and mineral firms would make handsome profits.
In the gold coin market, the benchmark Bahar Azadi dropped by close to 4% and fetched 37.70 million rials ($856 at the official exchange rate.)
Iran’s currency had hit a record low on Sunday, dropping past 100,000 rials to the US dollar, as Aug. 6 approaches when Washington is due to reimpose a first batch of economic sanctions on Iran.
In a statement published by CBI on Monday, the bank said it would soon launch the new measures “in the coming days”.
During his inauguration this week, CBI Governor Abdolnasser Hemmati said he has devised a plan to control the forex market and discussed it with President Hassan Rouhani.
Unlike his predecessor Valiollah Seif, who mostly ascribed the currency market volatility to non-economic factors like political influences, Hemmati said the current conditions are byproducts of deeper problems such as “imbalance in banks’ balance sheets” and “unwise decisions for using monetary tools”.
