Fixed exchange rate in Iran, good and bad sides

Business Materials 2 June 2015 18:34 (UTC +04:00)

Tehran, Iran, June 2,

By Temkin Jafarov, Mehdi Sepahvand - Trend:

The President of the Central Bank of Iran Valiollah Seif recently said that exchange rate in the country will be fixed after a nuclear deal with world powers.

However good points can arise from fixing exchange rates, care must be taken not to let go of the other aspects of the issue which could end in serious problems, Iraj Nadimi, deputy chairman of the Economic Committe of the Iranian Parliament, told Trend June 2.

By itself, fixing exchange rates is a good thing, it will prevent corruption and strengthen the competitive atmosphere, he said. However, there are downsides. Once we do that, we must also take care of production and consumption, Nadimi reminded.

We have to agree that regarding production in the competitive atmosphere, everything is evaluated together, such as inflation, interest rate, business market, and exchange rate, the MP said. If things are not taken care of, there will be no competition, smuggling will boom, and imports will peak, the lawmaker said.

Also, regarding consumption, Nadimi said that if prices hike, the end users would face troubles both in terms of quality and quantity of the goods and services they may receive.

Therefore, he concluded, if the government takes care of the multiplicity of the factors involved and yields a good management over the situation, fixing exchange rate will be beneficial.

Before sanctions were imposed on Iran over its nuclear program, each US dollar was exchanged for 10,000 rials. The rate rose to 33,000 rials, experiencing its sharpest rise in 2012 when sanctions were tightened. However, the official price for the dollar given to some special imported goods is 28,500 rials.

Iran is expecting the removal of the sanctions through a comprehensive nuclear deal set to be reached by the end of June.

Edited by CN