Government Tweaks Export Revenue Repatriation Rules
EghtesadOnline: The government on Wednesday again adjusted rules for the repatriation of non-oil export revenues that has long become a bone of contention.
Approved by the ‘Headquarters for Economic Coordination of the Cabinet’, exporters can use their export earnings for importing goods, raw materials and machinery either for their own needs or a third party, ISNA reported.
The so-called “import in exchange for export” or the “currency barter between exporters and importers”, was one of the options for exporters to fulfill their financial commitments in the policy package announced by the CBI in the fiscal 2018-19 and 2019-20. But the regulator has scrapped that rule for the current fiscal year (ends March 2021).
CBI’s inflexibility in demanding the return of foreign currency rather than importing goods, was largely due to concerns about chronic forex shortages in the market and in the framework of government policy to find sustainable income to replace plunging crude-oil revenue as a result of new sanctions imposed by the United States.
The historic decline in oil exports, crippling US restrictions on the financial sector and difficulties in importing raw material and intermediate goods have disrupted Iran’s economy and battered businesses across the spectrum. As if all this was not enough, the Covid-19 pandemic has become another major problem making a bad situation worse.
As the main decision-making body, CBI was under mounting pressure to allow exporters to settle part of their financial commitment with imports.
Exporters always complain that they face monumental US-engineered hurdles plus the calamity unleashed by the deadly disease when returning their earnings.
As the going gets tough, the central bank appears to have no choice but to retreat. CBI Governor Abdolnasser Hemmati confirmed the new rule on his social media account on Friday.
“The rules were approved in response to calls by private enterprise to facilitate the repatriation of foreign earnings,” he wrote. Details about the new rules will be released in the coming week.
Past and Present Rules
As per rules governing the return of forex in the last two years, exporters were required to sell at least half of their export earnings in the secondary foreign exchange market, known as Nima. Petrochemical companies were obliged to bring back at least 60% and sell it via Nima.
Nima is trade platform where exporters sell their overseas proceeds and companies buy to pay for their import needs.
Past rules stipulated that at least 20% of the total proceeds sold in the secondary market must be in cash, and the balance be used for importing raw material, machinery and equipment either by the exporting firm or a third party.
In the rules announced in July, the CBI ended the latter option and raised the minimum currency offer at Nima.
As per the new rules, all exporters must bring back at least 80% of their earnings in “foreign exchange hawala” and maximum 20% in hard currency.
The CBI doesn’t discriminate between petrochemical exporters and other export firms regarding the repatriation amounts in the new regulations.
Taking a supportive approach toward manufactures who export, the CBI henceforth will allow them to use maximum 30% of the overseas earnings for imports, but they must to sell the remaining forex in hawala.
‘Import Without Forex’
News outlets reported that the government’s new measures include revival of a policy to allow companies to import goods “without transferring foreign currency”.
The so-called ‘import without forex allocation’ is a method wherein companies can use their own foreign currency, in or outside the country, to import.
This policy was common in the recent past for imported goods for which the government was unable to open letter of credit. It was reported that the CBI imposed restrictions on this practice largely due to transparency concerns.
To improve transparency and monitor forex allocation for imports, the regulator opened an electronic platform in the spring of 2018 obliging importers to declare the amount of currency needed for a particular good with details about the origin, volume and company name.
Earlier in May, the CBI said it would accept the method “on the condition that the origin of the currency is unambiguous and transparent.”
The latest decision apparently seeks to improve foreign trade that has taken a drubbing in recent months as the economy gets strangled in more ways than one. Data released by the Islamic Republic of Iran Customs Administration show that export and import registered 35% and 21% decline in value and volume, respectively, in the first six months of the current fiscal year (March 20- Sept.21) compared to the corresponding period last year.