An Iranian Central Bank official has said that Iran has banned processing of purchase orders for imports based on US dollar.
Iran’s economic and financial difficulties and the lingering impact of sanctions continue to impact the value of its currency and trade relations.
Speaking in Tehran on Wednesday March 1, the CBI director of foreign exchange policy and regulations Mehdi Kasraipour said the ban on dollar-based purchase orders would be effective immediately.
Kasraipour said that the Central Bank has notified the Ministry of Industry, Mining and Trade of the new decision.
He said: “The Iranian banking network has not been able to process transactions in US dollar due to the economic sanctions imposed on Iran. Importers have to provide their requirements for the US currency through the black market and moneychangers. Now they need to replace US dollars with other currencies to further their transactions via the banking system.”
Although Kasraipour has mentioned the sanctions as the underlying cause of Iran’s new decision, this could be part of the Iranian government’s initiatives to control the black market for foreign currency and to prevent the rising price of US dollar against the Iranian currency tuman, which has been fast losing its value over the past nine months.
It is still not known whether the ban on dollar-based purchase orders would make any difference in controlling the devaluation of the Iranian currency if merchants begin to pay for imports in Euros, the most likely alternative to dollars.
The CBI decision appears to be oblivious to the fact that the Iranian currency has been losing its value against all major currencies, not just against the US dollar.
The price of US dollar in the Iranian market recently jumped to 5000 tumans with a 30 percent rise in comparison to the price in September.
Following a clamp down on the black market and officially authorized moneychangers during the past two weeks, every US dollar is being traded for 4500 tumans, which is still 16 percent higher than September.
Kasraipour said that “US dollar has a small share of Iran’s trade basket and the ban on the registration of dollar-based purchase orders is not going to cause major problems for Iranian businesses.”
Based on figures released by the Iranian Trade Development Organization, Iran has imported almost $43 billion worth of goods during the past ten months. The figures show a 22 percent rise in imports compared to the same period in the previous year.
Iran receives its oil revenue in Euros although the price of oil is determined in US dollars.
Replacing dollars with Euros may not create any problem in Iran’s trade with Europe. But during the past ten months only 10 percent of Iran’s imports have come from Europe.
Iran’s major trade partners are in East Asia and usually trade in dollars and their national currencies are not popular in the world markets.
Rising cost of imports
Mohammad Lahouti, the chairman of Iran’s export confederation told Fars news agency on Wednesday: “Some goods such as oil and Japanese and Korean made cars are traded based on the exchange rate for dollars.”
“The ban or processing of purchase orders based on dollars will limit purchasers’ options as sellers will have to convert the value of commodities twice during the transaction,” He added.
Lahouti concluded, “in this way, an importer must pay the cost of buying and selling foreign currencies; and this will bring about an increase in the price of goods.”