Majlis Backs Forex Rate Unification

The parliament supports the implementation of the long-delayed promise to unify the country’s dual foreign exchange rates, the chairman of Majlis Economic Commission said.

“The Central Bank of Iran and the government must be fully committed to unifying the dual foreign exchange rates and the Majlis will support them along the way,” Mohammad Reza Pour-Ebrahimi also told state TV.

He noted that synergy between state entities is required to implement the rate unification quickly.

“During our successive meetings with CBI’s governor and economic officials, we came to the conclusion that after the implementation of the Joint Comprehensive Plan of Action [the formal name of Iran’s 2016 nuclear deal with world powers], it is now possible to ditch the dual forex rate regime as the country can once again engage in forex transactions with other countries,” Pour-Ebrahimi added.

Iran currently uses two exchange rates: a free market rate that stood at 39,100 rials to the US dollar on Thursday and an official exchange rate for state transactions. CBI fixed the official rate at 33,460 rials on Thursday.

The government began to gradually increase the official exchange rate for it to approach the unofficial market rate and reduce the list of imports eligible to receive foreign currency at official rates.

The head of Majlis Economic Commission added that unifying forex rates will improve transparency and tamp down corruption.

“Forex rates should be determined by demand and supply in the market to stop squandering millions of dollars from our country’s resources,” Pour-Ebrahimi said, noting that the parliament will support the gradual implementation of rate unification.

CBI has also recently issued a new directive, based on which banks have to stop selling travel currency at official rates from September 11. The move was in line with reducing the role of the official forex rate in the economy.

Prior to the directive, banks offered foreign currency with a cap of $300 to travelers at official rates that are about 600 rials lower for each dollar compared to the open market rates.

 Setting the Stage

Hossein Abdoh-Tabrizi, a senior advisor to the minister of Roads and Urban Development, noted that CBI’s recent measures are preparing the grounds for forex rate unification.

“Establishing foreign exchange funds, stopping the sale of travel currency at official rates and closing the gap between open and official forex rates indicate that CBI is trying to implement rate unification,” he added.

He pointed out that CBI has made it illegal for an individual to keep more than $10,000 since the hoarding of foreign exchange is harmful for the country’s economy.

“CBI is determined not to let USD to be profitable to invest in and instead wants to lead investments toward production and employment,” he said.

Abdoh-Tabrizi, also a prominent economist, said now that CBI has managed to control the inflation rate, it should be careful to prevent any speculative activities in the market.