EghtesadOnline: While foreign currency rates, especially the US dollar, are gradually rising in the market, the government’s earnings from revaluation of the Central Bank of Iran’s forex resources also go up and according to the deputy head of Majlis Planning and Budget Commission, will reach up to $2.5 billion this year.
“An increase in foreign currency rates generates income for the government. For instance, the foreign exchange revaluation rate had originally been set at 29,500 rials for each dollar while the government sold it for 33,000 rials,” Hadi Qavami also told ICANA, the official news outlet of the parliament. As he points out, about 60-70 trillion rials ($1.5-1.8 billion) in revenues accrue from forex revaluation, or the discrepancy between the rates of forex resources.
“The administration is not after generating income from foreign currencies [by upping the prices] but that is what inevitably happens,” he added.According to Qavami, the government makes up for a portion of its annual budget deficit through forex revaluation and while the price for the greenback has been based at 33,000 rials in the annual budget for the current Iranian year (started March 21), it has now increased significantly and “might even reach 40,000 rials”.
This increase in greenback prices will entail revenues for the administration of President Hassan Rouhani anywhere from 70-100 trillion rials ($1.8-2.5 billion), which Qavami notes is not insignificant, “but it is not a good or reliable source of income because in a way it is an inflationary tax and means putting a hand in people’s pockets”.As to why foreign exchange and gold prices have been gradually and continuously on the rise in recent days and weeks, the lawmaker points to a decrease in oil prices as the main factor. “In the budget, each barrel had been predicted at $50, which is now being sold at $43,” Financial Tribune quoted him as saying.
Qavami noted that lower oil prices will create a budget deficit of about 370 trillion rials ($9.5 billion) by the end of the current Iranian year and when oil revenues decline, the volume of foreign currency coming into the country will decrease, leading to a rise in forex prices.
“When people take their deposits out of the banks, they transfer it to parallel markets such as the foreign currency market, which boosts forex prices because of added demand and adds to liquidity,” he said, stressing that interest rate cuts must not be implemented by force.
In conclusion, Qavami concedes that other international factors such as the recent destructive storms in the US have also impacted the rise in greenback prices, but says “these are not the main reasons”.