EghtesadOnline: Governor of the Central Bank of Iran said the exchange rates of the US dollar, which were unified at 42,000 rials last month, will not remain fixed and change 5-6% until the end of the current fiscal year on March 20, 2019.
Valiollah Seif, who was addressing a gathering of bank chief executives on Sunday, added that CBI will act according to the inflation rate when it comes to determining the forex rate, IBENA reported.
The forex unification came on the heels of a sharp slide in the value of rial.
According to the CBI measures, the US dollar for all purposes, including imports, travel, overseas students and research projects, will be offered by the government at the exchange rate of 42,000 rials, Financial Tribune reported.
The announcement was later followed by other measures approved by the Cabinet and subsequently notified by CBI.
Seif defended the decision to unify the US exchange rate and said under the threat of US sanctions, a unified rate system could address the economic needs of the country.
“Having a unified rate in the country is approved by most experts and this rate will be moderated by macroeconomic indicators,” Seif was quoted as saying by CBI’s website.
Rebuffing appeals from France, Germany and Britain, US President Donald Trump on May 8 withdrew the United States from the 2015 nuclear deal Iran signed with five other major powers.
Following US move in May to quit the deal, the US Treasury announced the administration would reimpose a wide range of Iran-related sanctions after the expiry of 90- and 180-day wind-down periods, including sanctions on Iran’s oil sector.
The Iran nuclear agreement, known as the Joint Comprehensive Plan of Action, signed by Tehran and the five permanent members of the UN Security Council–the US, France, Britain, Russia and China–plus Germany on July 14, 2015, imposed strict restrictions on Iran’s nuclear program in return for the loosening of economic sanctions.
Seif also referred to Nima and said problems in the system had been expected and time is needed for these glitches to go away.
The central bank launched the Forex Deals Integrated System (locally known by the acronym Nima) to track all forex transactions involving banks, exchange houses, importers and exporters.
The government’s forex decisions have recently come under private sector fire, with the business community complaining the lack of an open forex market that has been relegated underground.
Masoud Khansari, the head of Tehran Chamber of Commerce, Industries, Mines and Agriculture, this week called for a series of changes to the forex policy, including the creation of a “secondary market”.
“If the government allows for a secondary foreign exchange market to form with the aim of providing the required currency for other needs [apart from state imports and exports], foreign exchange rates will also come down,” he said.
Seif spoke on the recurrent theme of banking reforms and its necessity for the banking system, stressing that bringing banks in line with international standards has been among CBI’s priority in recent years.
“Requiring banks to prepare their balance sheets based on IFRS standards, preventing the payment of non-existent dividends to shareholders from deposits and government arrears to banks are among the most important CBI measures in reforming the banking sector,” he said.
The CBI chief noted that following the unilateral US exit from the nuclear deal, banking relations between Iran and Europe top their agenda.
“Ties between CBI and European Central Banks are ongoing and the course of talks will present a better view for officials to make their decisions,” Seif said.
Tehran has reportedly taken preliminary steps to establish a bank for transactions between Iran and the European Union in euros to settle financial issues which might arise after the US imposes fresh sanctions.
According to Ali Majedi, Iran’s ambassador to Germany, the creation of such a bank would allow Europeans to continue their trade ties with Iran, as well as with Russia, which is also facing US sanctions.