Regulated Forex Market Can Bring Stability to Forex Market
Regulated Forex Market Can Bring Stability to Forex Market
TEHRAN – A prominent activist in political and economic fields believe the Central Bank of Iran’s decision to launch the regulated forex market in order to bring stability to the forex market is a good idea provided that is implemented wisely and properly.

Mr. Hamid Reza Naghashian, with over 30 years of experience and activities in politics and economy and active presence in the Sacred Defense era, has now become more active in cultural fields after his retirement, and today he is mostly recognized as a media person and as the license-holder of Iran News English Daily and Sobh-e Eghtesad Persian Daily as well as the managing director of Sokhan Gostar Institute, publisher of both newspapers.


Mr. Naghashian in an interview with Sobh-e Eghtesad daily answered to the questions about recent developments in the forex market and disputes over cryptocurrency in the country.

When was asked about the launch of the regulated forex market by the Central Bank and the goal behind of it, Mr. Naghashian said that the new market can be a solution to control the forex market but some measures should be taken into consideration.

He said essentially those countries, whose economies are run based on oil revenues and through oil or any other product sales, earn forex by the sale and run their national treasuries by the resulted forex. He added that so sales of the resulted forex can have different rates in their countries.

Mr. Naghashian further said, “Forex needs in our country are divided into several groups. because about  90 percent of national economy is administered based on the government’s policies, measures and implementation. Consequently, forex rate is not a defined rate in the free market. And since there is no certain definition for the rate, the government can sell it with different rates by taking into consideration where it has to pay subsidies and where the rate can affect the price of the goods.

On the unification of forex rate, he said, “Actually in a country where it witnesses fluctuating inflation rate, the inflation rate is double-digit and its economic system does not enjoy an irreducible and stable inflation rate, there is no ability to have a fixed rate. In the past four decades, governments have decided to unify the forex rate but after a while the fixed and unified rate has turned into multiple rates. There are several factors behind it.  The first factor is the ruling system on that country’s economy. In Iran and after the victory of the Islamic Revolution, some economists who had graduated on the West like Messrs Roghani Zanjani and Mohsen Noorbakhsh in the early governments underlined the creation of free and open market. Of course for launching the Islamic economy in the country, there were some economists like Dr. Tootoonchian, who also worked with Finance Minister Mr. Namazi in the early days of the revolution and had several books on Islamic economy which are taught in foreign universities, were put aside and they were not employed in the national economy. The national economy was shaped by a group of economists which are known New Yorkers. They formed the economy based on what they had studied or perhaps based on what was dictated to him from overseas. Our officials did not realize how they were deceived. The second factor in administering the national economy is to divide the economy into two balanced parts as monetary economy and financial economy, and this balance was formed with a dubious inequality and perhaps it was an assumption that it had been formed. And consequently with an uneven competition in the monetary economy, the rate of money soared more and more and day by day,  and the inflation resulted from the rate of money would be a deadly blow to any economy. So this inflation paved the ground for more demands for money and led to speculation and today this reins the forex rate and creates multiple rates. Some part of the forex is earned through smuggling of goods based on the rates which are not registered in the banks and they are not registered because they are channeled into the country out of banking system. So it is natural that they define their own rates. Today an in an era that we faced a chaotic process in our forex system, those markets which fix the rate have gone out of the centralized domestic market and some part of it has been shifted to Dubai, some to Iraqi Kurdistan and some to Kabul in Afghanistan. So by taking into the consideration such a condition, you cannot define the forex rate, which is generated by the people, by force and restrictive laws. Actually the balance between resources of real demand and supply is the determining factor for free forex rate and governments have no roles in it. The third factor is the rate of investment in the country and governments had to encourage investors by taking proper measures but unfortunately a confusion happened that had direct impact on insecurity in the investment market. So it did not let production growth  challenge with the growth in liquidity and growing increase in generating money by the banks, and it led to unprecedented fluctuations in the forex rate and today  40 years after the victory of the Islamic Republic, the dollar rate from 70 rials has soared to almost 120,000 rials; it means that increased by 2000 times. I believe the new governor of the Central Bank Mr. Abdolnasser Hemmati has done a great job and he, by taking wise measures, could control the forex market by using the national forex reserves and by launching the NIMA system which is a channel for flooding the forex resulted from the exports to the market which was decisive in stability of the forex market. Of course such an injection needs sustainability for a stable forex market and I think for this reason the central bank has introduced the regulated forex market which can be a solution for stability of forex market. This will be successful if we take the power from Dubai, Erbil and Kabul markets for defining and determining the forex rate. I myself agree with multiple rate for forex but it should be managed and the gap between prices should not be high. If the gap between rates is high, it is natural that all should rush towards the lowest rate to take advantage of it and it will lead to corruption and illegal interests.”

Mr Naghashian added that the main player of the forex market is the logical reserves which is used as a lever to regulate the market. He added the second player is the private sector and that part of the state-run business which generates non-oil forex like petrochemical, electricity and steel producers. And the third player is the revenues from the oil sales which have decreased, and the other player and important player is consumption, he added.

He noted that consumption demands are divided into essential goods for daily life, developmental needs like machinery and raw materials for producing essential goods and services like education and medical treatment abroad, adding that travelling abroad can be also included in the consumption category. Mr. Naghashian stated that essentially such an approach can be organized and the Central Bank has gone forward to form a corporate to control the forex market and it is not bad but why in form of a corporate? He said if a corporate does a job by having a look at its own interest, it will have opposite result.

He also backed the regulated forex market and said it will lead to transparency which will make overseeing the market easy. He noted the regulated forex market actually exists in the country but it functions without having any name and it is run without control and irregularly. So such disorders and chaos usually led to unpleasant impacts, reiterating that this volume of generating the forex and forex rate can be an Achilles Heel in our economy. The more this controlling system is vast the more stability will be, he noted, adding, so the Central Bank has adopted a name for this controlling system in order to implement operational forex system in a the form of a united body and the reason behind its postponement is that its players like exporters do not like to obey the overseeing and control and they do not like their forex banking accounts to be checked and monitored by the Central Bank and the finance ministry. Mr. Naghashian admitted that when the country cannot appoint human resources in line with the goals of the revolution for running the country and there are some traitors among the ruling currents and even opposing with the revolution, it is very natural that some people create obstacles in way of national economy, and some of those people essentially have different approaches and some become mercenaries of the foreigners and get the order from overseas.

He added, “In overseas, when somebody wants to take $10,000 into the country, he has to answer several questions about the source of money. But Iran’s economic system is in a way that there is no accurate control in terms of statistics. Essentially we oppose to transparency. I believe that if the economy either state-run or private is run transparently and in the glass rooms, such a mechanism or system can act as a lever for transparency in real sources of consumption and it will have great impact on the stability. Now we need transparency in our tax system, in identifying the economic behavior and in micro and macro sectors, and also launch of mechanisms like the regulated forex market. All of these needs can help us to exercise a centralized economic custodian or at least centralized policies in the country.”

Mr. Naghashian also supported the idea of supporting cryptocurrency in the country especially government’s support in this regard despite huge electricity consumption. He said he definitely supports this idea because it is essentially to the national interests especially it bears positive impacts during the sanctions although country like China pays no heed to sanctions and it is the biggest cryptocurrency producers in the world.

He added that cryptocurrency is now a money can be converted into other current forex and it is a turning point. It means when you earn cryptocurrency, some people in the world can afford to buy it and it is a exchange which has been believed by the world. He went on to say that since this cryptocurrency is not generated in the world banking operation and its trade is essentially unable to be traced or curbed in the politico-economic systems of the world.