Iran's central bank opposes immediate change in foreign currency rates

Business Materials 1 February 2021 15:45 (UTC +04:00)
Iran's central bank opposes immediate change in foreign currency rates

BAKU, Azerbaijan, Feb. 1


The governor of Iran`s Central Bank stated criticism on allocating foreign exchange at the official rate (42,000 rials per dollar) to import essential goods adding that but we have to keep this rate to support the vulnerable classes of the society.

“I believe in unified foreign currency rate to prevent corruption, but any change in foreign currency rate must be done very carefully to control its inflation shock. I am not against the removal of foreign currency at the official rate, but it is not such an overnight policy,” CBI governor Abdul Nasser Hemmati said on a television program on Sunday night, Trend reports citing IRIB.

The budget review committee of the Iranian Parliament has recently voted in favor of changing the foreign currency exchange rate for the import of essential goods from 42,000 rials to 175,000 rials per dollar, suggesting that the prices of essential imports should be set in accordance with the exchange rate prevailing in the Forex Management Integrated System (locally known as NIMA).

According to the committee’s Spokesman Rahim Zare, the move is aimed at unifying the country’s multiple exchange rates, preventing rent-seeking and corrupt practices.

Although in line with the mentioned committee, Iran’s multiple exchange rate economic systems have been criticized by several economic and political bodies as well as scholars and experts, many still believe that creating these extreme changes in a situation where Iran's sanctioned economy has been severely affected by exchange rate fluctuations, will not be beneficial for the economy and is going to result in an inflation shock.

The official rate is the subsidized rate set by the government, the market rate is in fact the one controlled by the market’s supply and demand, and the NIMA rate is defined in accordance to the market for providing hard currency at an acceptable rate to the importers and exporters of essential goods.