Forex crisis and smuggling predicament in Iran

Forex crisis and smuggling predicament in Iran

Dalga Khatinoglu, Trend's Iran News Service Chief

Iran has announced that imports of computer and related components are allowed for import again, several days after the prices on these goods jumped up by 5 times, as a result of administration's decision to ban imports of some luxury goods, including clothing, cell phones, and computer parts.

Iran has been grappling with the problems of decreasing oil exports by one million barrels, and accepting Euro and Dollar for selling oil after U.S. and the EU enforced a new round of sanctions as of June 28 and July 1, aiming to cut the Islamic Republic's oil revenues.

In March, Iranian Finance and Economic Affairs Minister Shamseddin Hosseini announced the country's foreign exchange reserves at $100 billion. This is while the International Monetary Fund estimated that Iran's forex reserves fell to $70-80 billion last year.

Meanwhile, the administration has said that $18 billion of the reserves are the hands of people. Although the amount of Iran's forex reserves in the current year is unknown, the categorization and prioritization of imports, the shortage of dollar for importing highly strategic goods, such as medicine, and the 80-percent rise in the price of dollar against rial during the past year, indicate that Iran's forex reserves are not in good condition.

Industry, Mine, and Trade Minister Mehdi Ghazanfari has announced that some $12 billion worth of luxury goods is imported legally per year.

Even if Iran succeeds in stopping legal imports of so-called luxury goods, it will face two serious problems. The first will be the psychological effect in the market and the sharp rise in prices of some of the goods, such as computers, cell phones, and clothing, which have been banned to be imported, and the second will be the rise of such smuggled goods.

According to official statistics, annually around $20 billion worth of goods have been smuggled into the country in recent years. The Iranian government has claimed that the above mentioned figure reduced to $14 billion past year.

However, Alireza Monadi-Sepidan, the member of the Majlis presiding board, told the Fars News Agency on October 5 that some $30 billion worth of goods is yearly smuggled into the country.

Moreover, Mohsen Bahrami Arz-Aqdas, the member of the Chamber of Commerce's trade committee, has said that imports of illegal goods into Iran surpassed $20 billion during March-August this year.

The volume of smuggled computers, cell phones and clothing has shown to be quite significant. Last year, Iranian Customs Administration director Abbas Memarnejad announced that 20 million cell phones should be annually supplied to the domestic market via import, however, smuggled cell phones accounted for over 95 percent of cell phones in the market in the Iranian year 1389, which ended in March 2011.

In January 2012, Mehdi Yekta the secretary of the union of Iranian textile and leather exporters also told the Fars News Agency that some $8.5 billion worth of clothing is illegally imported into the country each year, accounting for about 70 percent of the total imported clothing.

The Tehran computer market is full of low-quality and unguaranteed smuggled computer components, mainly manufactured in China. According to the Mehr News Agency, over 410,000 low-quality Chinese-made smuggled computer components were seized in the Iranian year which ended in March 2011.

This huge volume of smuggled goods, plus the reduction in oil exports which makes for 20 percent of the state budget of $460 billion and 80 percent of Iran's forex income, as well as the problem of receiving the money for selling oil in euro and dollar, has put Iran's forex reserves at serious risk.

The ban on imports of luxury goods not only will lead to a surge in their prices, but also will add to their illegal imports, because in today's world, cell phones, computers and clothing are among the most used goods in the society.

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