Iranian Government Sets Unified Exchange Rate of IRR against USD

Iran one of the largest crude steel manufacturer in MENA region has produced around 21 MnT curde steel in CY'17 is facing currency depreciation from past few months. IRR during 1-Nov'17 was noted to be around 40,540 which got increased IRR 41,250. During the year end IRR was noted to be around IRR 42,890. In Jan'18, IRR was noted to be around IRR 44,560 and in Feb'18 it was around IRR 46,430. Last month IRR was around 46,700 but on Monday, the IRR depreciation continued and the currency was quoted at IRR 61,000 to the USD in the open market.

In an emergency meeting presided by President Hassan Rouhani on late Monday, in order to cap the depreciation, Vice President Eshaq Jahangiri said that " the US dollar will be offered only at the unified rate of IRR 42,000 to everyone as of Tuesday morning and anyone engaging in dealings with any other rate will be violating the law and committing an act of smuggling."

This decision might affect the steel exports as producers were getting better realization in export against selling the steel in domestic market. It might ease steel imports as recently the government brought down the import duties on various types of flat steel, despite objections by producers and even government bodies such as Iranian Mines and Mining Industries Development and Renovation Organization.

According to Planner "This decision might affect export for short period of time, but it cannot be said that USD will be stable at this level. Now no one in market sells USD at this price and still there is no dollar being sold in market at this price."

Iran has been operating two exchange rates: a free market rate and an official exchange rate which was set by the Central Bank of Iran on a daily basis and used for state transactions. The government has been working for years to gradually increase the official exchange rate and bring it closer to the free market rate. In order to reach that goal, it has also been shrinking the list of imported items eligible to receive foreign currencies at official rates.

"I assure the people that the government is capable of providing enough foreign exchange resources to the market," Jahangiri added in his address.

He also referred to the government`s post-sanctions achievement in attracting billions of dollars in foreign finance resources to the country, and said, "The government is determined to preserve the stability of the economy."

Inputs taken from Financial Tribune and Mining News