EghtesadOnline: Unfulfilled commitments by importers of essential goods have decreased substantially thanks to measures by the Central Bank of Iran 18 months ago, an official with the bank said.
Unfulfilled commitments by importers who use subsidized currency (1USD 42,000 rials) for importing essential goods declined from 27.87% in January 2019 to 9.48% now, according to Gholamreza Panahi, the CBI deputy governor for currency affairs.
In other words, for 9.4% of total subsidized currency given to import basic goods nothing was brought in, the CBI website reported.
Following a steep decline in the value of the local currency two years ago, the government introduced stringent import-export rules, including a ban on importing of non-essential goods produced inside the country.
It allocated subsidized forex for importing a very short list of basic (food) products to protect consumers against price gouging and the rising cost of living.
Subsidized currency is worth almost a quarter of the rates in the open market. A dollar is currently sold for 159,000 rials in free market. The greenback buys 146,000 rials at the secondary market, known as Nima -- a special platform for exporters and importers to trade currency.
Panahi commended the CBI measures and currency rules for the remarkable decline in importers’ failures to meet their financial commitments.
As for CBI oversight, the official pointed to the effects of a monitoring mechanism dubbed ‘Meeting Import Commitments’. The system is connected to an online platform operated by the Trade Promotion Organization of Iran used for registration of all import orders.
The main function of the system is to promote transparency within the import process, from foreign currency allocations by the CBI to placing orders and customs formalities.
In addition, the regulator banned cheap currency payments to importers that did not meet their forex commitments. The performance of banks with regard to import commitments of their clients was appraised and monitored by the CBI.
Critical Audit Report
Panahi’s statements come on the heels of a report by the Supreme Audit Court of Iran, the supervisory arm of the Majlis earlier in the month that claimed large amounts of foreign currency given to importers remain unaccounted.
The court said out of the $31.4 billion in subsidized currency given to importers from March 21 to Dec. 3, 2018, goods worth $26.59 billion were imported. In other words, $4.82 billion was unaccounted.
The report was dismissed by senior government officials, including President Hassan Rouhani and CBI boss Abdolnasser Hemmati.
Rouhanai said some of SAC’s findings were “100% incorrect”, blaming writers of the report for their “sheer ignorance about the country’s rules and laws”.
Due to lack of openness and transparency, subsidized currency policies are often blamed for waste of the country’s scarce currency reserves ending up in the deep pockets of the army of vested interests, avaricious traders, middlemen and rent-seekers.
An increasing number of the people and economic experts say the government’s subsidized forex policy has so far failed to support the low income strata. They find serious faults with the system guiding the distribution of basic goods and absence of efficient government control and oversight.