Raisi’s Repetitive and Costly Plan to Curb the Exchange Rate
Raisi’s repetitive and costly plan to curb the exchange rate: According to Iran Gate, on February 21, 2024, the Central Bank established an entity called the Service Currency Exchange Center, claiming to control the exchange rate by redirecting demand to this center. Simultaneously, with the start of the Service Currency Exchange Center, the Integrated Currency Market, which was responsible for pricing and announcing rates, ceased its operations.
Last week, the Central Bank unveiled a policy that, according to Mohammad Reza Farzin, is a new strategy, announcing the imminent control of the rising dollar rates. However, experts believe this plan is similar to past policies and will not bring about any new changes. The only difference from previous similar cases is the grandiose name, which has further confused those seeking to obtain currency.
What is the Service Currency Exchange Center?
According to the Central Bank Governor, the Iran Currency and Gold Exchange Center is tasked with providing the necessary currency for importing essential goods, medicine, and also assisting with student, medical, legal fees, printing articles, participating in exhibitions, sports federations, and knowledge-based companies. It is clear that the exchange rate for the dollar needed for imports is, as Farzin announced, 28,500 tomans, and this rate should also be applied in this market.
Four Steps to Obtain Currency from an Anonymous Center
By searching online, we find that the Central Bank’s mentioned website does not appear in search results, and applicants must type the internet address of this system accurately and completely to access the desired site.
Although many government-supporting media and hardliners have extensively published advertorials for this center in Google’s search results, the issue is that the center’s website is nowhere to be found, making access very difficult.
However, the Central Bank has announced on its official website four steps for obtaining currency from the Iran Currency and Gold Exchange Center. These steps have been a topic of discussion among economic activists, exporters, and importers, leading them to protest. The four steps are as follows:
Step One: First, you must visit a bank or exchange office that is a member of the Iran Currency and Gold Exchange Center to submit your documents. The list of member banks and exchange offices is also listed on the exchange center’s website. However, many importers seeking to obtain currency at 28,500 tomans complain about the difficulty of accessing this site.
Step Two: In this stage, the exchange office or banks listed review the applicants’ requests and provide the necessary response. In other words, this government action adds a new layer to the numerous golden signatures, a layer that now brings exchange offices to the table of the people and the basket of essential goods for citizens.
On the other hand, some applicants for service currency report that despite submitting all the required documents, they still receive calls from the exchange office or bank they contacted, informing them of incomplete documents. This is despite the fact that all documents have been uploaded online, and there are no physical copies to get lost during transfer from one unit to another.
Step Three: The third stage is quite similar to the second stage, where, after approval by the exchange office or bank in contract with the Currency and Gold Exchange Center, the request is once again referred to the center for further approval or rejection by the center’s experts.
Meanwhile, the new Central Bank plan is designed so that there are multiple steps for the currency to pass between exporters and importers, each of which may lead to deviations that will impact the country’s economy.
Step Four: In the final stage, the applicant has 24 hours to visit the specified exchange office or bank after receiving approval. The exchange office or bank is obliged to purchase currency at 28,500 tomans from exporters and sell it to importers. However, if the applicant does not visit the specified center within the deadline, their request will be canceled, and a new request must be submitted.
What Critics Say
As mentioned, import and export activists have widely criticized the Central Bank’s implementation of this plan. Exporters continue to insist on their previous stance, complaining about the deep gap between the real exchange rate and the Central Bank’s announced rate of 28,500 tomans.
Importers of essential goods also complain about the increasingly complicated steps to obtain the necessary currency. These economic activists claim that this action by the government and the Central Bank will not only have no impact on the astronomical rise in exchange rates but will also exacerbate rent-seeking and corruption in the allocation of government currency for imports.
On the other hand, importers believe that the currency’s intended uses should be provided to importers as soon as possible; otherwise, delays will occur in purchasing or clearing goods, and domestic needs for food and medicine will not be met.
Experts also believe that this plan will impose significant costs on Iran’s economy. The most important of these costs is the signal from the government indicating a lack of willingness to fill or reduce the depth of the gap between different exchange rates, which has broken the back of producers and exporters.
Raisi’s Confusion and the Implementation of a Strange Plan
Last week, Ebrahim Raisi once again promised to curb the exchange rate in front of everyone. This promise was made while the dollar was fluctuating around 48,000 tomans, but at the time of writing this report, each US dollar is trading for over 53,000 tomans in the Tehran free market.
It seems that the Central Bank and the government feel intense pressure to curb the price surges of the dollar, and implementing such an unnecessary and costly plan will only exacerbate the rising price trend in the free market.
On the other hand, it should be noted that the currency needed for imports, despite all its shortcomings, was being exchanged through the old mechanism. Although this mechanism had numerous flaws, the government’s new plan has effectively doubled the twists and turns to deliver the morsel to the mouth. Since this center’s launch, not only has the free market not signaled a decrease in the dollar rate, but the price of each US dollar continues its upward trajectory at a high speed.
