Economy, Domestic Economy

Foreign Exchange Controls

Lawyer at Central Bank of Iran
Foreign Exchange ControlsForeign Exchange Controls

The free movement of money across the borders of states, which is a familiar practice in some western countries, is at odds with legislators and policy makers in Iran. Due to the high volatility rate of foreign exchange price in Iran, the government deems it necessary to uphold a tight foreign exchange control system across the country, including its borderlines, in order to ensure the stability in the markets.

Oil proceeds is the main source of foreign exchange in Iran and as a result of the nationalization of oil industry, which occurred around 60 years ago, all such proceeds belong to the government. Therefore, the supply and demand of foreign exchange in the market is virtually dependent on the government’s discretion. “To whom the foreign exchange should be provided and at which price?” is the main question the government and central bank face in making policy decisions related to the foreign exchange. Those who want to have access to foreign exchange, must clearly and openly declare why they need it and for which purposes that foreign exchange would be used. Those who want to import commodities should send detailed information about the goods to be imported, including quality and quantity, to the Ministry of Commerce and only after approval of that ministry, the necessary amount of foreign exchange would be provided to them. They should also pledge that the documents proving the actual import of goods, issued by the customs administration, would be submitted by them to the bank issuing the letter of credit within a specified time limit. Any failure to meet this requirement would entail the judicial prosecution by the Central Bank of Islamic Republic of Iran.

Iranian tourists and pilgrims, who intend to travel abroad, are also entitled to purchase a specific amount of foreign exchange (i.e. USD 300 or its equivalent in other currencies) at the official rate. The payment of this amount is also conditional upon the submission of tickets and other documents proving the definite intention to travel abroad.

In addition to the regulations mentioned above, there are some restrictions related to the transfer of foreign exchange across borders. It is forbidden to transfer foreign exchange in excess of USD 5000, or its equivalent in other currencies, out of the country. The excess amount, if discovered by the police, would be appropriated and the wrongdoer shall be convicted to a fine equal to four times of value of the appropriated foreign exchange. Foreign nationals, who tend to travel to Iran for pleasure or business, should declare the amount of the currency they are carrying at the point of arrival. Otherwise they would not be allowed to repatriate it from the country, if it is more than USD 5000.

Besides these regulations, there is a restriction imposed by the Monetary and Credit Council on the transfer of Iranian rial out of the country. According to which, transfer of the rial in excess of 500,000 is forbidden and those who commit this crime would be fined an amount equal to two times of excess amount. Iranian currency in this regard, included notes and coins in circulation across the country, as well as Iran Checks issued by the Central Bank of Iran.

Hamid Ghanbari works at the Legal Department of the Central Bank of Iran.