Gov’t Still Pursuing Forex Rate Unification

The government’s longstanding plan to unify Iran’s dual foreign exchange rate regime has faced several barriers, but a deputy economy minister said the plan is well and alive.

“The existence of dual rates for foreign currencies leads to rent-seeking behavior and that is why forex rate unification has been and still is a policy pursued by the government,” Hossein Mirshojaeian also told IBENA.

As to why the plan is yet to materialize after years of delays, the official backed the Central Bank of Iran by stating that it wishes to implement the policy when it can hold and when the regulator can prevent the unified rate from splitting once again.

“In other words, the central bank must always have enough resources to control the foreign exchange market, while the potential inflationary effects of this plan must also be considered,” he said.

The central bank has also referred on numerous occasions to a lack of sufficient correspondent banking relations with top-tier foreign lenders as one of the main reasons impeding the rate unification.

Foreign exchange rates have been rallying strongly in recent months, widening the gap between open market rates and official rates devised by the central bank.

As of Thursday’s market close, the rial was quoted at 46,470 against the US dollar in Tehran’s market, Tehran Gold and Jewelry Union’s website reported. This is while the official exchange rate of the US currency was set at 36,950 rials, which shows a significant gap.