Bar unexpected major developments, the stability of the currency market is “guaranteed for the foreseeable future”, says Hamid Zamanzadeh, research director at the Monetary and Banking Research Institute. He also is of the opinion that the stability in the currency market makes the single forex rate a doable plan.
On the projected stability of the currency market, Zamanzadeh said ‘’the only prerequisite for the implementation of a floating exchange rate is the easing of financial transactions so that the Central Bank of Iran can access its foreign exchange resources easily.”
“Except for this [lack of normal banking relations with the outside world], there are no barriers in the way of realizing the single and unified rate,” he was quoted as saying by Fars News Agency on Monday.
Although sanctions have been lifted on most Iranian banks, they are struggling to find partners willing to work with them. Most international banks remain reluctant to do business with Iran, for fear of contravening the remaining US sanctions on the country, including a ban on using dollars in their deals with Iran.
Subject to Market Mechanisms
As to what mechanism the Monetary and Banking Research Institute will employ to unify foreign exchange rates, he said the CBI has no intention to exert downward pressure on the parallel market rate in moving toward the official (single) currency rate.
“It all depends on market conditions whether or not the CBI will choose to move the official exchange rate closer to the market rate. Therefore the plan to unify the rates is to bridge the gap between the two exchange rates by elevating the official rate, “he said.
Iran reverted to the dual exchange rate system in 2010 when economic and banking sanctions hammered the already volatile markets. The rial lost almost 75% of its value in 2013.
On whether or not the repatriation of part of the foreign assets – thanks to the release of frozen assets and the clearance of oil payment dues – had had any significant impact so that the CBI could move ahead to implement the unified rates, Zamanzadeh said there is no problem regarding hard currency resources at the moment.
“We have enough forex resources in several countries and also large amounts in unpaid oil export bills. As such, the volume of forex resources has experienced a significant increase in the last two years and we face no difficulties in this area,” he said.
Referring to non-oil exports, he said the situation is developing in a way that will narrow the trade imbalance in non-oil exports and revenues from these exports are being used to pay for imports.
