Central Bank former advisor: Bourse never helps Forex fluctuation in Iran

Iran Materials 7 September 2012 13:53 (UTC +04:00)

Azerbaijan, Baku, Sep.7/ Trend D.Khatinoglu/

A former advisor for the Central Bank of Iran believes that launching the Forex Bourse in the country never stops foreign exchange rates.

Bijan Bidabad told Trend.

"Forex Bourse might help transparency in Iran's foreign exchange markets, but fixing the Forex rates needs other measures."

A member of the board of directors of the National Development Fund, Mahmoud Dodangeh announced on Sep.6 that 20 per cent of the National Development Fund (NDF) of Iran's assets, equalling $5 billion, will be offered on the foreign currency bourse.

The Central Bank of Iran has approved general outlines of launching a foreign exchange market.

Iran's national currency has a faced significant drop in value since 2010, losing above 50 per cent of its worth. The USD was sold at 22,250 rials on Friday, while this figure for Jan.2010 was 10,425 rials.

Iranian President Mahmoud Ahmadinejad who called the USD a "worthless piece of paper" in 2010, now seems be in complicated trouble with the increasingly rise of the USD rate in Iran.

Bidabad said that trading Forex on Bourse never fixes the foreign exchanges' rate. "The Forex should be sold in open markets and open markets should balance the Forex rates in Iran," he said.

The Iranian Central Bank's former advisor underlined that in all international economies, the USD rate can define and set the country's import and export policy and investment flows. Then it needs to permit for Forex rates to be fixed in open markets and not by artificial measures.

Additional to the USD, the pound and euro were also traded at 34,980 rials and 27,730 rials respectively, compared to 35,000 rials and 27,850 rials during last week.

On January 26, the Central Bank of Iran fixed the rate at 12,260 after the U.S. dollar surged to almost double that level in open currency markets.

According to Bidabad's statement, the main reason for the USD price jump in Iran was the government's budget deficit. "When a government faces a budget deficit and attempts to compensate the deficit by getting loans from internal banks, especially the Central Bank, the value of national currency falls," Bidabad added.

Mohamamd-Reza Khabbaz who served as a former member of the economic committee of Parliament until May 2012, announced in January 2012 that Ahmadinejad's government faced a $15 billion deficit during last solar year (ended March 18).

The Iranian Central Bank issued a report in May 2012, saying government debts to internal banks until the last solar year have increased four times during six years and reached 400 trillion rials (equals to $31.7 billion based on the official USD rate).

The head of the Supreme Audit Court, Abdolreza Rahmani Fazli confirmed in June 2011 that the Iranian government borrowed $15 billion from banks during first eight months of starting the subsidy reform plan.

The Ahmadinejad administration cut subsidies in December 2010 and started to transfer 450,000 rials monthly to citizens' bank accounts. According to official statements, the government pays citizens about $3 billion in month.