Blocked Iranian assets so far released as part of a nuclear interim deal with the West is set to be spent as prioritized by the Central Bank of Iran, a top monetary official said on Saturday.
As a result of the Geneva nuclear agreement between the five permanent members of the UN Security Council plus Germany (P5+1) and Iran, $4.2 billion in Iran’s oil revenues, which was blocked in international banks, were returned to the CBI in eight installments. Further, during later negotiations it was settled that an additional $2.8 billion be returned to Iran in six stages. By the end of the second phase (Nov. 24), the aggregate amount returned stood at $7billion. Nearly $4.9 billion more was set to be released in November after the two sides agreed to extend their interim deal for the second time until July.
“The money will be used to import basic goods, food products and medicine at the official exchange rate,” ISNA quoted Akbar Komijani, deputy governor of the CBI, as saying.
The CBI has prepared a list of goods in ten categories with a descending priority. Items with higher priority (such as food and medicine) are imported at the official exchange rate, which is currently hovering at of 27,300 rials per dollar, allocated via a foreign exchange trading center. Items with lower priorities may or may not be eligible to receive currency at the official exchange rate, depending on CBI’s level of currency reserves.
The same regulations which apply to the savings of foreign exchange reserves of the CBI apply to the recently returned reserves, the official clarified.
As the foreign receipts from other sources have also been added to the reserves of the CBI and the bank has been withdrawing from the aggregate amount, it cannot be clearly stated what amount of the $7 billion which has been unblocked has been expended, Komijani explained, adding that the CBI’s expenditure has been only enough to cover economic needs and boost domestic production.
Currency Swap
On a different note the CBI official said in order to decrease expenses and eradicate the need to trade in US dollar, the central bank supports the idea of currency swap in trades. The idea, however expedient, can be instigated only if the barter conditions for both countries involved are similar on several levels.
Iran has signed 47 contracts with different countries in which local currencies are set to be swapped, 27 of which have been signed with China, according to Fars news agency.
“The matter which is of uttermost importance is that the trade balances of both countries involved need to be reasonably close to one another, otherwise the difference will have to be compensated in a currency different from their own, namely, the American dollar,” Komijani said.
He said that while the strategy might lend itself well in trade with countries of similar balance, it is not entirely feasible for countries that do not have relatively similar trade balances.
The truth of the matter unfortunately is that the exports of most countries which are willing to adapt currency swapping strategies in trade with Iran are considerably higher than their imports, he said.
Currency swapping can be incorporated if the economic situation improves, and the extensive gap between exports and imports is bridged, the official said. “Given the difficult times the economy is going through, such strategies can potentially prove effective.”
