(SHADA: TEHRAN) – Addressing the 23rd Summit on Iran’s Monetary and Exchange Policies in Tehran, the Minister of Economic Affairs and Finance Shamseddin Hosseini said that the Iranian Government managed to successfully counter inflationary impacts of sanctions on the country’s money and forex markets. The sanctions influenced the supply side of foreign currencies in Iran in different ways as they led to a decrease in the Government’s USD-denominated revenues sourced from the export of crude oil and gas condensates which was aggravated by restrictions on and delays in transfer of these revenues into the country, Hosseini noted, adding that the petrochemical sector faced the same difficulties. Restrictions on transfer or conversion of Iran’s foreign exchange reserves along with the abovementioned difficulties made it quite hard for the Central Bank to manage and intervene in the Iranian forex market, he pointed out.
The Economy Minister also noted that a 20-percent rise in our non-oil exports could offset part of the pressure exerted by the fall in oil revenues, adding, “the demand side of the market was stirred by the sanctions leading to an increased cautionary demand for foreign currency by the market participants and resulted in an increasing amount of arbitrage trading in the black market and these conditions encouraged the tendency for capital flight.”
The Government Spokesman for Economic Affairs went on to point out that under such circumstances, along with the official exchange market supplied by the Central Bank and authorized exchange bureaus, a secondary or free market was formed which resulted in multiple exchange rates and that made the exchange market susceptible to unforeseen shocks. “Under these conditions, the Iranian foreign exchange market received two shocks in February 2012 and September 2013. In order to counter these shocks and manage the forex market, a score of measures were adopted by the Government including the categorization of the country’s needs for foreign currency and their prioritization to be met by CBI, As such, basic goods, drugs and medical equipment were categorized in the 1st and 2nd group. The foreign currency needed for the import of these commodities was agreed to be provided at the benchmark exchange rates set by CBI,” Hosseini stated. The foreign currency needed for the 3rd to 9th groups, he added, were provided by a special Foreign Exchange Trade Centre which served as a parallel forex market managed and supervised by CBI to cover the trade and cautionary demand for foreign exchange.
Services were also categorized in the abovementioned groups, the Minister noted, adding that the provider of foreign currency for the import of drug and basic goods was the Central Bank and the suppliers were the National Iranian Oil Company (NIOC) and the National Development Fund (NDF). “Managing and monitoring the capital accounts and preventing the transfer of precious metals out of the country, adjusting the country’s trade pattern in accordance with the foreign exchange patterns so as to reduce the need for conversion and transfer of foreign currencies, organizing the unofficial forex market, increasing the trade risk at the unofficial forex market, and launching a foreign exchange portal to synchronize the trade cycle and customs procedures so as to accelerate the flow of foreign currencies gained out of export were among other steps taken by the Government in this regard,” Hosseini observed.
“These policies prevented further shocks hitting the forex market to a great extent but we cannot expect these measures to fully offset the impacts of almost a 50-percent drop in Iran’s oil revenues, as the main source of the country’s income in foreign exchange, or the consequences of political restrictions on money transfer,” he said.
The Iranian official went on to underline the fact that these shocks also led to a boost in the export of agricultural and mineral goods, and services and improved the competitiveness of the country’s tourism industry as well as those industries which are not dependent on imports, adding that Iran’s imports fell 14 percent last year to 53 billion dollars while the country’s non-oil exports (including the gas condensates) amounted to 41.3 billion dollars. As such the foreign trade deficit reduced from 18 billion dollars in 1390 to 12 billion dollars last year which was a real improvement in the country’s foreign trade balance.