Iran: No More Subsidized Foreign Currency for Sugar Imports
EghtesadOnline: The government will no longer allocate subsidized foreign currency for sugar import, as per the letter forwarded to the Central Bank of Iran by the Ministry of Industries, Mining and Trade.
Traders are allowed to procure their foreign currency needs for importing sugar from the export earnings of non-oil products (petrochemicals, steels and minerals) traded through the so-called secondary FX market, known by its Persian name Nima, Financial Tribune reported.
Sugar is the fifth item after red meat, butter, pulses and tea that have been removed from the category of products labeled as essential goods (or Group I products) and included in Group II.
Following the steep decline in the value of Iran's local currency last year, the government introduced import policies, including banning the import of non-essential goods with domestic counterparts (Group IV of products) and the allocation of subsidized foreign currency at the rate of 42,000 rials per dollar to 25 categories of products (Group I) to cushion consumers against the increasing prices of products and costs of living.
Two other groups of imports were also defined: Group II that mostly includes raw materials, intermediate and capital goods, and Group III that consists of consumer goods.
Importers of products listed in Group II have to meet their forex requirements from the secondary FX market. Imports of products included in Group III may acquire foreign currency from exporters who are not required to offer their forex earnings on Nima.
Rice, wheat, poultry, eggs, fertilizers, seeds, raw sugar, oil, soybean, heavy-vehicle tires, publication paper, tea, pharmaceuticals, medical equipment and industrial machinery used for the production of essential goods were categorized as subsidized import items in the first place.
Now the question is whether the removal of sugar from the list of subsidized imports would lead to its price hike. The Market Regulation Headquarters’ response to this question is negative as “Sugar available in warehouses and markets are 10 times more than that of last year. That would be enough for months to come. On top of that, the local production of sugar exceeds 1 million tons annually,” the Persian-language daily Khorasan reported.
According to the Statistical Center of Iran, the 10th Iranian month (Dec. 22, 2019-Jan. 20) saw sugar prices increase by 0.6% compared with the preceding month and 40.5% over the corresponding month of the previous year. A kilogram of sugar was sold at 58,789 rials (43 cents) last month.