Page 30 - bne IntelliNews Country Report: Iran Dec17

The Central Bank of Iran (CBI) has announced that it intends to do away with Iran’s longstanding dual foreign currency exchange rates by the start of the next Persian year in March 2018, t he Iranian Banker Journal reported on July 3.
The lower rate has been available to buyers for the past two decades, but in recent years the Rouhani administration has tightened the lower rate to only "for essential imports" such as medicines and wheat. According to a CBI press release, “the necessary requirements are now in place to close the gap on the lower rate.”
“Foreign currency rate unification can be implemented quickly, and even its directives are ready for notification,” CBI governor Valiollah Seif said. However, the banking boss did note the main prerequisite for creating the unified rate will be that Iranian banks must offer the rate when dealing with foreign banks.
In recent years, several Iranian banks have used the gap in exchange rates to earn a profit from customers on both sides, causing concern over how their profits can derive from both a transaction fee and the transfer.
Iran has been living with two exchange rates for the Iranian rial for several years, which has both helped to fuel corruption and hampered cross-border trade. Those with ready access to the official rate have been able to benefit from relatively cheap hard currency, while other individuals and businesses have had to pay a higher price via the open market.
The gap between the two rates expanded as international sanctions were tightened against the country in the early years of this decade. The election of President Hassan Rouhani in 2013 and the nuclear agreement, which came into force in January 2016, have been followed by significant improvements in the country’s economic performance, but the issue of parallel exchange rates has stubbornly persisted.
Unifying the rates has been one of the key policy goals of the Rouhani government. Despite the CBI efforts and the government’s desire to maintain a degree of stability, a number of leading actors in the Iranian business community opine that the Iranian rial is currently overvalued and that a devaluation will be in order in 2017.
30 IRAN Country Report November 2017 www.intellinews.com