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Appliances And Vehicles Market Hit By Forex Crisis, Blackouts on the Way

A home appliances store in Iran.
A home appliances store in Iran.

Two weeks after the Rouhani administration introduced its new foreign exchange policy of a single rate for US dollar, travellers and businesses complain that foreign currency is not available at the government-imposed rate of 42,000 rials for a dollar.

Vice-President Ali Asghar Mounesan told the Iranian Students News Agency (ISNA) on Monday April 23 that travel agents have been complaining about limitations and ambiguities in the new policy.

The problem is more serious for those who need to travel to a third country in order to get a visa for entry into their destination country and therefor need more foreign currency.

Meanwhile the rising price of dollars continues to impact the economy as media reported on Sunday April 22 that the import of vehicles has come to a halt and the price of home appliances has been on the rise during the past week.

Farhad Ehteshamzadeh, an official at the vehicle importers union told Fars news agency on Sunday that no import applications have been registered for his union’s members after the new rate for US dollar has been announced on April 10.

Ehteshamzadeh said the government has not issued any directive to the banks about selling foreign currency to importers. This, he said, has led to an unprecedented demand for foreign currency.

He added that every dollar would cost importers 48500 rials rather than 42000 rials, even when allocations begin and all funds have to be converted to Euros based on new regulations.

Ehteshamzadeh’s statement came one day after President Hassan Rouhani promised importers to “rest assured as the foreign currency they need would be supplied by the government.”

Meanwhile, Vice-President Es’haq Jahangiri stated on Sunday that “The government has taken measures to prevent any rise in the price of essential commodities and medicine.”

Jahangiri said that on Monday April 23 the government would introduce a “unified center to manage foreign currency affairs,” adding that exporters would offer the foreign currency they gain for sale at the center, and importers would purchase the same foreign currency via banks and authorized exchange bureaus.

In the meantime, the Iranian Customs Administration announced on Sunday that import of vehicles has dropped 73% in number and 77% in value during the past month compared to the same period last year.

Economists believe the rise in the prise of foreign currency is the main reason for the drop in imports.

Mohammad Tahanpour, the chairman of home appliance importers’ union, told Tasnim news agency on Sunday that the price of home appliances in the Iranian market have had a 7% rise during the past week.

He added that although there are also other reasons involved, the rising price of foreign currencies against Iran’s rial is the key factor in the hype in the price of home appliances.

In another development, Shargh daily newspaper reported on April 22 that the union of electrical industries has called for a rise in the value of their contracts with the Ministry of Energy.

According to Shargh, the union has informed the ministry in a letter to the minister that 100 of their contracts with the ministry may no longer be economically viable following the implementation of the new foreign exchange policy, warning that this could lead to power cuts and blackouts in the country.

Iranian officials have blamed other countries for the rise in the price of foreign currencies and devaluation of Iran’s rial. However, many news websites and Telegram channels attributed the problem to IRGC’s linked companies pulling out their dollars from the market.

The possibility of the United States’ withdrawal from the West’s nuclear deal with Iran has also adversely affected the market, further adding to the ongoing instability.

The Rouhani administration imposed a new rate of exchange 18,000 less than the market price of 60,000 rials against one US dollar in early April. Economic analysts, such as Fereidoun Khavand in Paris, have said that imposed rates and security approaches will not solve Iran’s economic problems in the long run.