August 09, 2019
July 22 was the deadline set by the Central Bank of Iran (CBI) for non-oil exporters to repatriate their foreign currency earnings during the last Persian year (March 2018-March 2019).
After the deadline, figures indicated that companies had so far managed to bring back less than half of their earnings out of total exports of $40 billion, the Iranian Students News Agency (ISNA) reported.
This is despite the CBI’s repeated efforts to tweak rules and offer initiatives to encourage the errant exporters to repatriate more of their overseas earnings.
According to Economy Minister Farhad Dezhpasand, petrochemical companies and steelmakers complied the most with the currency repatriation rules while other industries were less willing to do so.
Efforts at getting a handle on foreign exchange did not seem to be doing well. The Central Bank had announced in July that it would open an entirely new foreign exchange market on August 12. It didn’t. A week before that deadline, it announced there were software problems and the inauguration of the new scheme would have to be postponed.
In light of the difficult economic conditions and shortage of foreign currency due to the new US sanctions, currency repatriation has gained special importance for the government and it is seen as partial substitute for crude oil revenues that have declined drastically over the past few months.
Rules stipulate that export earnings should be returned in one of the following ways: selling currency on Nima (Persian acronym for Integrated Forex Deal System); cash transfers through hawalah; selling to open market exchange bureaus; or using the foreign exchange to import goods.
Exporters of non-petrochemical goods are obliged to sell at least half of their earnings on Nima and 20 percent in cash to money changers. The balance can be used for importing goods either by the exporting firm or any a third party.
Petrochemical exporters must bring back a minimum of 60 percent of their currency earnings and sell it via the Nima system.
Nima is a platform where exporters sell their currency earnings to companies importing non-essential goods—goods other than food, medicines, medical equipment and a few other categories. The dollar long sold on that market for much less than on the open market, which made it unpopular with firms that held dollars. But over the past month the two rates have come very close together (see chart) and on two days in late July the Nima price actually exceeded the open market price.
Central Bank Governor Abdolnasser Hemmati, meanwhile, ridiculed the Trump Administration, saying it had failed in its main campaign to destroy the national currency as a prelude to overthrowing the state. He boasted that the rial was now going for around 120,000 to the dollar, vastly improved from 190,000 at its worst point. (He neglected to say that the dollar only required 42,277 rials on the day that Trump was inaugurated in 2017.)
Hemmati said, “Today, my colleagues and I in the CBI are proud that we had a tiny share in the all-out resistance and victory of the Iranian people against this big plot.”
