Central Bank Unveils New Strategy for Foreign Exchange Policy

TEHRAN (Iran News) According to ILNA, citing the government’s information portal, Abdolnaser Hemmati explained the performance of the commercial foreign exchange market after the unification of exchange rates and detailed the framework of the country’s new foreign exchange policy as well as the market’s two-week performance.

Hemmati emphasized that under Article 20 of the Law on Permanent Provisions of Development Programs, Article 44 of the Central Bank Law, Article 11 of the Seventh Five-Year Development Plan, and Clause 19 of the General Policies of the Resistance Economy, the Central Bank’s foreign exchange strategy is based on a “managed floating exchange rate with the application of necessary controls.”

According to Hemmati, the Central Bank’s strategy is to manage the foreign exchange market in line with fundamental economic variables, ensuring minimal volatility around the trend, while taking into account foreign exchange reserves, the competitiveness of domestic enterprises, and the prevention of corruption-prone environments in foreign exchange and trade.

He added that given ongoing sanctions, the intensification of economic warfare, and the inadequacy of conventional foreign exchange intervention methods to maintain exchange rate stability—along with disruptions in foreign exchange flows—the implementation of certain foreign exchange controls has become necessary.

Hemmati noted that by converging multiple exchange rates, an integrated exchange rate system will be formed. Requirements such as order registration, currency allocation, registration of the source of foreign currency, systematic operation of exchange offices, and capital account controls are among the key examples of these foreign exchange controls.

Referring to developments in the commercial foreign exchange market over the past two weeks, Hemmati said that despite an almost threefold increase in outstanding currency allocations—from $1.3 billion to $3.7 billion—the market has moved from a daily $500 million excess demand for foreign currency to a $70 million excess supply. He attributed this shift to the elimination of import-related rent-seeking.

He added that while part of the decline in demand may be due to the need for rial liquidity, a 50 percent increase in trading volume—equivalent to a $70 million rise in daily transactions from $80 million to $150 million—indicates that the commercial market has become deeper and more central to the integrated management of the foreign exchange market.

The Central Bank governor said that during the two-week period, various currencies equivalent to $2.75 billion were traded in the commercial foreign exchange market, all of which were supplied by non-oil exporters.

He noted that the average exchange rate in this market ranged between 120,000 and 130,000 rials per dollar.

Hemmati stressed that the Central Bank’s focus is on the repatriation of export revenues and on creating incentives and removing obstacles in the process of returning foreign currency. He said this approach has led to a meaningful increase in the return of export proceeds to the country’s commercial cycle in the short term and will contribute to higher exports in the long term.

In closing, the Central Bank governor announced that to date, more than 27 million households have used the electronic coupon subsidy program, amounting to 785 trillion rials, to purchase essential goods.