Iran's Parliament prediction for foreign currency rate increases commodity prices

Business Materials 11 January 2021 13:57 (UTC +04:00)
Iran's Parliament prediction for foreign currency rate increases commodity prices

BAKU, Azerbaijan, Jan.9


The increase of the official foreign currency rate from 42,000 rials to 175,000 rials per USD by the parliament has caused an increase in imported commodity prices and the following decision could lead to rising inflation in the economy, said an economist and board member of the Shahid Chamran University of Ahvaz.

"About 80 percent of Iran's domestic industries rely on importing basic goods if the final price for imported basic materials would increase then the price of domestic products would also increase," said Morteza Afaghe, Trend reports citing IRNA.

"The increase of foreign currency rate would lead to the export of raw material and the country would run out of natural resources with low price. Due to sanctions in the past three years, the purchasing power has drastically declined therefore demand for domestic commodities would not increase if their prices are expensive," he said.

Statistics show the price of imported basic goods has increased even though the official foreign currency rate of 42,000 rials was assigned for their purchase. Inflation has led to increases in salaries, and the cost of transportation and other services that increased the price of commodities.

"The 40 percent inflation has effected basic commodities and parliament to eliminating official foreign currency of 42,000 rials would intensifies the rise of prices. The parliament approval of official foreign currency rate of 175,000 rials instead of 42,000 rials per USD would reduce the chance of decline of foreign currency rate in a free market," he added.

According to Afaghe, the parliament's action to increase the rate would not reduce the rate in the free-market even if sanctions are lifted and the FATF-related bills are being approved.

"The government could increase foreign currency revenues and hasten their transfer to the market and reduce the free market rate but it seems due to parliament suggested figure for foreign currency rate the free market rate would not be less than 200,000 rial per USD, although any positive change could temporarily reduce the rate," he noted.

It is predicted the parliament decided rate in the budget would not reduce the free market rate in the new Iranian year.