Iran's Government Declares Currency Trading by Exchange Offices Legal

The Iranian government, during a cabinet meeting, approved proposals from the Central Bank aimed at "organizing the currency market," allowing exchange offices to resume currency trading that had been halted after the unification of the exchange rate. Following the unification of the exchange rate in April, exchange offices were prohibited from buying and selling currency. On April 20, Eshaq Jahangiri announced the official dollar rate at 4200 tomans, stating that "other unofficial rates are considered smuggling." According to the government's information portal, in the cabinet meeting on Sunday, August 5, it was approved that the activities of authorized exchange offices would be "permitted solely for service and travel purposes in accordance with the Central Bank's currency regulations with the registration of necessary documents and evidence." The report states that authorized exchange offices in Iran can conduct small transactions for purchasing currency in cash while "adhering to currency regulations, especially anti-money laundering regulations." It was also decided that the currency for all essential goods and medicines would be provided at the official rate, while the currency needed for importing other goods would be sourced from the secondary market and from the currency obtained from the export of all non-oil goods and services. The report adds that the provision of currency for importing other goods in the secondary currency market will be sourced from the currency obtained from the export of all non-oil goods (especially petroleum products, natural gas, petrochemicals, steel products, and colored metals) and services. Transactions in this market occur between exporters and importers through banks and authorized exchange offices, and the exchange rate in this market is determined based on supply and demand. The Iranian government has announced that this rate will be appropriately communicated as the free currency rate, and at the same time, exporters must "commit to returning the currency obtained from exports to the economic cycle of the country." It is still unclear at what rate the free currency will be bought and sold, but recent reports suggest that each US dollar might be traded between 8,000 to 9,000 tomans. According to the cabinet's decision, the entry of currency in cash and gold into the country has also been declared "permitted without restrictions according to the rules and regulations of the Central Bank by individuals and legal entities." According to Iranian media, with this decision, the import of gold in raw form will also be exempt from all "rights, legal duties, and value-added tax" according to the Central Bank's regulations. "Implementation of the new currency package from Tuesday" Meanwhile, Abdolnaser Hemmati, the new head of the Central Bank of Iran, appeared on the second channel of Iranian television on Sunday night and announced a new currency package that, according to him, will be operational from Tuesday, August 7. He stated that "declaring currency as smuggling was incorrect," announced the buying and selling of it by exchange offices, and at the same time said that the Central Bank would not intervene in determining the exchange rate in the secondary or free market. Mr. Hemmati emphasized: "When we declared currency as smuggling, the pressure of demand shifted to coins. Now this package will cause the price of coins to decrease." The head of the Central Bank of Iran stated: "The current secondary market has great depth in terms of the types of goods, and unlike the previous market where only 20% of small exporters could use it, in this market all economic actors will be allowed to operate." He added: "However, the exchange rate in this market will not be completely liberalized, and the Central Bank will monitor it closely, and wherever it feels the need for the Central Bank's intervention, it will control the exchange rate in this market using its foreign exchange reserves." The price of the dollar in the free market decreased this morning, just before the announcement of the government's new currency policies. Iranian news agencies reported the "suspension of the supply" of travel currency by banks to travelers abroad and also a decrease in the price of the dollar. According to Fars news agency, the payment of travel currency by banks will be halted, and travel currency will be paid at the "secondary market" exchange rate. Meanwhile, the price of the US dollar on Sunday dropped from 10,200 tomans to 9,750 tomans, and the price of coins also decreased by 250,000 tomans to reach 3,500,000 tomans. Since late last year and before the announcement of the US withdrawal from the JCPOA, the Iranian currency market has experienced serious fluctuations, with the price of the dollar reaching an unprecedented figure of 12,000 tomans within a few months. Promises from government officials, the unification of the exchange rate, and the establishment of a secondary market, along with the arrest of dozens of individuals labeled as "disturbers" by judicial authorities, have yet to impact the reduction of the exchange rate. Other high-ranking officials of the Islamic Republic attribute the currency turmoil and its impact on the Iranian economy to the "enemy" and "dirty hands behind the scenes."