The ‘Council for Coordination of the Three Branches of Power’ has decided to delegate more authority to the Central Bank of Iran to enable it prop up the rial and stabilize the chaotic forex market, IBENA reported.
Heads of the three branches of power (executive, legislature and judiciary) stressed the need and significance of working in concord to help restore calm to the currency market struggling with skyrocketing rates unseen in the history of the country.
No details were available about the council's approvals or what can the CBI do to bring down the high and rising forex and gold prices.
Speaking on the sidelines of the council’s meeting, Economy Minister Ehsan Khandouzi said the CBI already has enough power over the work of exchange shops and banks. "The CBI wants extra clout to effectively intervene in the market," Khandouzi said, the news agency reported Sunday.
"Listed companies' refusal to repatriate their export revenue was among the main concerns of the CBI. Based on the approval, all listed companies, including those owned by the government such as oil/ gas firms are obliged to abide by the central bank rules for repatriating export revenues."
Khandouzi denied recent reports about restrictions on Iran's use of the Emirati dirham.
Currency rates have jumped to historic highs over the past several months and the rial is in free fall. Seeing the rapidly deteriorating economic conditions people seek safe havens to protect what is left of their hard-earned savings.
First Vice-President Abbas Mokhber, Economy Minister Ehsan Khandouzi and the Governor of the Central Bank of Iran Mohammad Reza Farzin went to the Majlis at the weekend to brief lawmakers on the explosion of forex and gold prices that has drawn the ire of even some of the close allies of the government, not to mention prominent political-economic analysts and market observers.
After the rare closed-door parliamentary session, MP Mohammad Reza Mirtajjodini said the "First VP assured the parliament about government plans for controlling the [forex] market in the near future," Tasnim news agency reported.
"It was agreed that the parliament and government hold joint sessions on the problems visiting the currency and gold markets," he said. "The Majlis and government must work in tandem to tackle the current state of the market."
The CBI’s Farzin has repeatedly blamed inflationary expectations as the main culprit behind the skyrocketing forex rates. “A wide range of factors are impacting currency prices that must be controlled by other organizations. Insofar as the CBI is concerned, we decided to create a center where the real demand for foreign currency can be addressed.”
He blamed "price-gouging" for pushing up currency rates and urged the public to ignore temptations because “they can buy currency at exchange shops and banks at lower prices.”
According to media reports, the US dollar traded at 581,000 rials on Monday in Tehran's open market, 1.13% higher than the previous day's close. Melli Exchange and other bank-affiliated moneychangers quoted the greenback at 452,070 rials, unchanged on Sunday’s close.
The euro gained 0.89% and was quoted at 613,500 rials. Exchange bureaus sold the European single currency for 482,325 rials, unchanged on the last trading day. The UAE dirham was up 1.13% Monday to buy 161,200 rials in the unofficial market and the GBP jumped 1.4% to finish trade at 695,900 rials.
Bullion prices also increased on Monday with the benchmark Emami gold coin quoted at 295 million rials, the Half Bahar Azadi coin increased to 178 million rials, the Quarter Bahar Azadi coin was traded at 117 million rials and one gram of 18-karat gold was worth 27.43 million rials.
The regulator unveiled a new currency/gold market this week apparently in the latest bid to tame runaway prices that have peaked to historic levels.
The CBI says it wants to gradually expand the scale and scope of the newly-launched Iran Exchange Center (ICE) and replace it with the free (unofficial) market. When the market is fully developed the CBI says it can implement policies to better manage the currency market that is apparently out of control.
It will be the main market for forex and gold, the CBI boss Farzin said. “We have plans to introduce new financial instruments for trading gold and currency including futures, forward instruments, forex salaf contracts…”
Negotiated Rates
In related news, Kamran Soltanifar, secretary of the Iran Exchange Shops Union, called for the resumption of currency trade at negotiated rates. "The market was stable when the CBI allowed moneychangers to sell currency at negotiated rates. However, prices rocketed after the CBI prohibited such forex deals."
"The market was indeed stable then…supplying the market via authorized exchange shops can help maintain some balance between forex demand and supply," he told Tasnim news agency.
Last June the CBI allowed moneychangers to buy currency from exporters and retail and institutional currency holders at negotiated rates.
The move was welcomed by exporters because they could sell their currency at higher rates than the Nima platform, where rates are usually lower than the open market.
Nima is an online platform affiliated to the CBI through which exporters sell their overseas currency in the form of hawala. Companies buy the currency for importing goods, machinery, equipment and raw materials. In this system, importers declare their currency needs, exporters register their proceeds and banks and authorized moneychangers are brokers.
Currently exchange shops sell foreign currency using central bank resources and at rates set by the CBI," Soltanifar said, adding that supplying the market with export revenues would help improve market stability.
Last month the CBI said selected banks would sell foreign currency up to €5,000 to each Iranian once a year at rates announced on the ICE website.
Up until recently every Iranian could buy $2,000 or equivalent a year at slightly lower rates compared to the unofficial market by presenting their ID. That policy led to long lines of buyers and dealers who then sold it in the open market at higher prices to make an extra buck.
