Ali Asghar Mounesan, head of Iran’s Cultural Heritage, Handicrafts and Tourism Organization, voiced opposition to policies regarding the allocation of foreign exchange to travelers, stressing that the guidelines need to be reformed.
“ICHHTO was against the plan from the beginning because the currency that is aimed to facilitate people’s travel is preparing the ground for fraud,” he was quoted as saying by ILNA.
He said ICHHTO has had correspondence with the Central Bank of Iran frequently and in the latest negotiations, it was agreed that the matter be reconsidered and finalized this week.
Formidable Task
“So long as the methods of supplying foreign currency are misguided, monitoring and supervision will come to no avail … favorable circumstances for opportunism should be eliminated because controlling such a large number of travelers is a herculean task,” he said.
Mounesan maintained that if any support and assistance is to be provided to the tourism sector, it had better be aimed at boosting inbound travel.
As per new forex regulations, travelers to foreign countries can receive up to €500 and €1,000 depending on their destination at the official exchange rate which is much lower than that of the free market. Only first-time travelers are eligible to receive the sum.
Past Precedent
The policy of foreign travel money was first introduced in 2012 with a sudden drop in the value of the rial. It persisted during the next administration until September 2017 when it was finally scrapped to the delight of forex experts. Travelers would then have to obtain their needed currency at the free market exchange rate.
However, the policy was reintroduced following sharp fluctuations in forex rates in March 2018.
Irrational Move
Offering foreign currency to travelers at a lower exchange rate has been described as subsidization of outbound travel which is strongly criticized by experts who deem it an irrational move given the country’s limited currency reserves at present.
The Persian daily Donya-e Eqtesad has estimated the total amount of subsidy given to travelers since the initiation of the plan at around 50 trillion rials ($1.2 billion).
Assuming the travel trends in the period between April 11, when the regulations were enforced, and the end of the first summer month on July 22, would be the same as the previous year, the number of outbound tourists has been calculated to be 2.475 million.
Taking into account the distribution of tourists among foreign countries and the amount of currency they receive based on their destination, each traveler would have received around €550 on average, according to the paper’s estimations.
Subtracting 10% of this population, supposedly not first-time travelers, the government would have allocated a total of €1.225 billion from its reserves for outbound tourism in just over three months.
There is a difference of around 40,000 rials between the free and the government-set euro rate, which means 49 trillion rials ($1.2 billion) have been given to outgoing tourists in subsidy.
Breeding Ground for Fraud
The policy has faced criticism from other viewpoints as well. It has been pointed out that the needs of travelers have been disregarded in the policy as some might need more or some less than the set €500 or €1,000.
Both of these groups will eventually be directed toward illegal markets, the first to supply their required money and the latter to sell the residue of currency at higher rates upon their return.
Certain groups have also been trading people’s travel money in return for a cheap foreign tour.
Experts have suggested that travel money be offered within the framework of a second forex market at a negotiable rate to prevent further waste of the country’s hard-earned monetary resources, especially during the current financial tensions.
