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Iran's return to the world economy is helping planemakers cope with a downturn in global demand, providing homes for airplanes orphaned by reversals in the growth plans of airlines elsewhere.

Planemakers are also gambling that the early delivery of such aircraft could help prop up a nuclear sanctions deal between Iran and world powers, threatened by conservative opponents in both Washington and Tehran, western sources said.

Since sanctions were lifted under the deal to reopen trade and limit Iran's nuclear program, the Islamic Republic, trying to boost its economy after years of isolation, has joined a waiting list of up to eight years for 200 new aircraft.

But efforts to meet its most immediate needs have been boosted by financial problems facing other airlines across the world, as new airplanes come onto the market at bargain prices.

"We hunt opportunities in the market. If there are opportunities, we can take advantage of that," Deputy Roads and Urban Development Minister Asghar Fakhrieh-Kashan told Reuters.

Despite denials by manufacturers that the downturn is hurting, Iran's return to the market has brought to light pockets of surplus aircraft. With presidential elections looming in May and keen to show the 2015 nuclear deal is working, Iran has proved only too keen to take up the slack.

So far, it has taken delivery of three Airbus jets. Industry executives say they were left on the planemaker's books when their Colombian buyer, Avianca, balked at taking delivery. Such orphan planes are often known as "white tails".

Last week, Iran also signed a deal for 20 ATR turboprops.

Unusually in a risk-averse industry with high costs, four of those are already built and ready to be delivered: short-circuiting their usual waiting time.

Although it denies they are white tails, ATR took the rare decision to build them for Iran Air before the final contract was signed. Analysts say that too is a signal of market weakness, as manufacturers wrestle with weakness in developing economies.

> Turkish Swap

The sudden reshuffling suits both sides, as Iranian President Hassan Rouhani tries to demonstrate results from the nuclear deal, which hardline candidates intend to oppose in the May elections.

It also holds up a mirror to geopolitical changes in the region, played out in the fortunes of national carriers.

While Iran's aviation industry is coming out of decades of cold storage as sanctions are lifted, Turkey has seen a slump in travel demand after a failed coup and attacks in major cities.

Now, Turkish Airlines is having doubts about taking one of the industry's key growth engines, a 350-seat Boeing 777-3000ER.

Uncertainty over next month's scheduled delivery contrasts with Iran's urgent need for the same model, the first of which is due to be delivered to Tehran in April or May next year.

Fakhrieh-Kashan confirmed that at Boeing's suggestion, Iranian representatives are now inspecting the Turkish configuration to see whether the airlines could swap deliveries. Boeing declined to comment.

Iran has ordered 15 777-300ERs as part of a deal for 80 Boeing jets. They are crucial to Boeing's efforts to steady the declining production of 777s, pending the arrival of a new model.

Bringing forward Boeing's first delivery to Iran since the 1970s could also provide broader momentum to the sanctions pact, hampered by funding problems and uncertainty about the attitude of US President Donald Trump who has said he dislikes it.

Since all planemakers need US export licenses due to the number of US parts in their planes, any decision to block the Boeing deals would likely halt European activities in Iran, too.

"It helps to bring Boeing to the same table as everyone else," said a senior European industry executive, referring to the talks to swap Turkish and Iranian deliveries.

Iranian officials have, however, been forced to defend the reshuffling from suggestions that Iran is getting cast-off airplanes. They stress the Avianca jets, for example, had been sitting unused for two years and had never flown commercially.

"It is good for Airbus and Boeing, but this is part of the game that everyone knows," Fakhrieh-Kashan told Reuters.

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The administration of US President Donald Trump has notified the US Congress that Iran is complying with the terms of the 2015 nuclear deal negotiated by former president Barack Obama, and says the US has extended the sanctions relief given to the Islamic Republic in exchange for curbs on its atomic program.

However, in a letter sent late Tuesday to House Speaker Paul Ryan, US Secretary of State Rex Tillerson said the administration has undertaken a full review of the agreement, known as the Joint Comprehensive Plan of Action, AP reported.

Tillerson said the National Security Council-led interagency review of the agreement will evaluate whether it "is vital to the national security interests of the United States".

The certification of Iran's compliance, which must be sent to Congress every 90 days, is the first issued by the Trump administration. The deadline for this certification was Tuesday midnight.

As a candidate in the 2016 presidential election, Donald Trump was an outspoken critic of the deal but had offered conflicting opinions on whether he would try to scrap it, modify it or keep it in place with more strenuous enforcement.

Tuesday's determination suggested that while Trump agreed with the findings of the UN nuclear watchdog—the International Atomic Energy Agency—that Iran is keeping to its end of the bargain, he is looking for another way to ratchet up pressure on Tehran.

Despite the sanctions relief, Iran remains on the State Department's list of state sponsors of terrorism for its support of anti-Israel groups and is still subject to non-nuclear sanctions, including for alleged human rights abuses and for its backing of Syrian President Bashar Assad's government.

The nuclear deal was sealed in Vienna in July 2015 after 18 months of negotiations led by former secretary of state John Kerry and diplomats from the other four permanent members of the UN Security Council—Britain, China, France and Russia—and Germany.

Under its terms, Iran agreed to curb its nuclear program in return for billions of dollars in sanctions relief.

Opponents of the deal in the US objected, claiming it did not allow for the kind of inspections of Iran's atomic sites that would guarantee the country's nuclear activities remain peaceful.

Obama, Kerry and others who negotiated the deal strenuously defended its terms and said the agreement made the world a safer place.

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between the two countries (Iraq & Iran) seem to be real close to popping at the same time......why???? well it looks like the financial side of the problems is close  to being rectitude and as Adam has said in  Wednesdays  general chats that  the HCL is closed to being done....tipping point done

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SUNDAY
April, 23 2017
 
Government Shifting  Monetary Policy
Government Shifting Monetary Policy
  1. Economy
  2. Business And Markets
Monday, January 02, 2017

Tayyebnia: Government Rewriting Monetary Policy 

 
Average inflation rate has been registered at 8.6% for two consecutive months, marking a pause in a downtrend experienced in the preceding months
 

The government is unwilling to pull down the inflation further.

Economy Minister Ali Tayyebnia said the government has reached “the stiff core of the inflation” and that “it has become difficult to fight it”.

He argues that reducing the inflation rate to lower than 8% has never been the policy of President Hassan Rouhani’s administration in the first place, as it could have “grave consequences” for the economy.

Teymour Rahmani, business school professor at the University of Tehran, defends the policy in an interview with the Persian weekly Tejarat-e Farda.

Rahmani explains that Iran’s economy does not have the capacity for lower inflation rates, noting that the index might even witness a slight increase in the upcoming months, driven by rial’s depreciation against the dollar.

Average inflation rate has been registered at 8.6% for two consecutive months, marking a pause in a downtrend experienced in the preceding months. The average monthly growth in the Consumer Price Index since the beginning of the current Iranian year (March 20, 2016) stands at 0.8%, which the government has called a “redline”, the crossing of which threshold should be considered a wakeup call as it marks a shift in monetary policies.

The overall CPI (using Iranian fiscal year to March 2012 as base year) stood at 252.9 in Azar (the Iranian month ending December 20), indicating a 1.4% growth compared with the previous month—the highest over the past 18 months. Therefore, the "redline" has already been crossed.

Since August 2013 when Rouhani took office, the government managed to keep in check factors contributing to high inflation.

One year into office, the government cut inflation to half and then pulled it below 20% in September 2014, and then to around 15% in March 2015. The administration now prides itself in having lowered inflation below 10% for the rolling year ending June 20 for the first time in a quarter century.

“The government has fulfilled its promise of lowering inflation to the single-digit territory,” Rahmani said. “Insisting on further pulling down the rate is not economically logical.”

The economist argues that lowering the inflation rate further could lead to increased unemployment and exacerbated recession.

Iranian industries are grappling with a long-tanding slump. Manufacturing has been in deep recession as a result of sanctions imposed for years on the Iranian economy over Tehran’s nuclear program, among other reasons.

Many industries are short of cash, amid the government’s credit crunch resulting from economic isolation and falling oil prices.

Rahmani believes that because of structural problems in Iran’s banking system, contractionary policies put the most pressure on banks, which find it difficult to provide facilities for industrial firms.

“There are factors that make lowering the inflation rate costly. This is measured by a factor known as ‘sacrifice ratio’ in economics. Falling inflation could involve a much higher sacrifice ratio,” he said.

The sacrifice ratio is an economic ratio that measures the costs associated with slowing down economic output to change inflationary trends. The ratio is calculated by taking the cost of lost production and dividing it by the percentage change in inflation, and its quotient gives the loss of output per 1% change in inflation, according to Investopedia. If inflation is becoming a problem, central banks will try to cool economic growth to reduce inflationary pressures. However, this reduction in output costs the economy in the short run and the sacrifice ratio tries to measure that cost.

> Forex Shock

According to Rahmani, it will most likely be difficult for the government to stabilize inflation at this rate.

“Considering the increasing foreign exchange rates, it is hard to maintain the inflation rate at this level. It is even likely that the inflation rate would increase, due to the increasing value of dollar against rial,” he said.

Last week saw Iran’s currency depreciate to 41,900 rials against $1—its lowest ever. It marked a 16% loss in the value of rial against the dollar in the past few months, although rial has become stronger in the past couple of days. Every dollar was traded for 38,830 rials in Tehran's market on Sunday.

While making Iranian exports more attractive in overseas markets, the depreciation will increase the cost of imports, leading to higher prices for food and other products.

“The recent forex shock will bring about a price shock as well, consequently increasing commodity prices. Therefore, inflation rate cannot stay put at 8.6%; it will go up,” Rahmani said.

Rising exchange rates contribute to inflation by increasing the prices of imported commodities. As imports account for a sizable portion of commodities involved in the consumer price index, high exchange rates mean rising prices and thus higher inflation.

On the other hand, since prices of imported capital goods and intermediate goods are included in calculating domestic manufacturing costs, a weak rial against the dollar means higher cost of domestic production, hence increased inflation.

Fluctuating foreign exchange rates have had a significant impact on CPI growth in Iran, which was evident from rising inflation after 2012, as it exceeded 40% during the previous administration.

Fluctuations in foreign exchange rates are one of the main reasons behind inflationary expectations in Iran, which in turn have a short-term effect on inflation.

Soon after the exchange rates went through a steady phase two years ago, inflationary expectations tempered and inflation subsided with it.

Rahmani believes that it will take months before the rial's depreciation translates into a rise in inflation.

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Anotable decline in liquidity growth is a reassuring sign that Iran will be able to anchor its inflation in the single digits, the governor of the Central Bank of Iran said.

Valiollah Seif took to the popular social media app Telegram to publish a review of Iran's economic achievements during the previous fiscal year and respond to a number of media reports that viewed the latest World Economic Outlook report on Iran by the International Monetary Fund in a negative light.

Recounting a number of achievements registered last year, namely stability in the foreign currency market, a single-digit rate of inflation after nearly three decades and a double-digit growth figure, Seif said the latest data on the growth of liquidity and the loan portfolio of banks are complementing those feats.

"According to the latest data, liquidity registered a growth of 23.2% during the previous fiscal year (ended March 20. 2017) which, considering its meaningful decrease compared with the previous years (that posted a 30% increase) and its lower growth pace compared with the average figure in bygone years, offers better reassurance about controlling the inflation rate and maintaining this achievement," he said.

According to the CBI governor, the new data paint a brighter future for the Iranian economy in the eyes of international institutions and makes the country more attractive to foreign investors.

In its recent report, IMF had predicted Iran's inflation rate to hit double digits in 2017 and 2018, to which the CBI on Saturday pointed out that the report was based on data collected up to December 14, 2016, and newer data would change IMF projections.

CBI further said "a good level of economic growth would result in tandem with the single-digit inflation" during the current fiscal year that began on March 21.

Seif noted that coupled with the decline in liquidity growth, the volume of bank loans during the previous fiscal year rose to 5,484 trillion rials ($146.2 billion) from the 4,173 trillion rials ($112 billion) of the previous year, which registered an increase of 31.4%.

"It is evident that even with the existence of credit crunch and structural problems in the banking system, this amount of credit allocation shows the high commitment of banks to finance various economic endeavors," he wrote.

Seif said these positive developments convey the hopeful message that "the economy has made a successful recovery" and because these achievements are "non-inflationary", the economy will experience a burst of dynamism and vigor.

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The Bank of Industry and Mine is currently negotiating with three foreign banks to attract funds for Iranian projects, the bank’s chief executive said.

“Negotiations are currently underway with Chinese, European and Russian banks to receive long-term credit lines to finance national and infrastructure projects,” Ali Ashraf Afkhami was also quoted as saying by IBENA.

The official, who was speaking in a meeting with India’s Ambassador to Iran Saurabh Kumar, said his bank has a high capacity to provide finance for infrastructure projects, especially in power plant, railroad and aviation sectors.

Afkhami noted that in the past four years, seven power plant projects have been implemented using 12.15 trillion rials ($322.6 million) worth of loans provided by BIM.

“During the same period, three petrochemical projects of Kavian, Lorestan and Mahabad were implemented using BIM credits, four petrochemical projects are underway and capital allocation for another project has been approved,” he said.

Noting that his bank is credited with 50% of loans for steel sector, Afkhami said BIM is currently bankrolling 11 steel projects and has an active credit line for a railroad project connecting Tehran to Isfahan.

In the meeting, Kumar stressed that the Chabahar project is very important to India. The agreement for the project has been signed by the Export Development Fund of India and the Ports and Maritime Organization of Iran, in which BIM has been named as the agent bank of the project valued at $150 million.

Both officials also agreed that a delegation consisting of representatives of the Exim Bank of India and the state-owned UCO Bank would soon travel to Iran to finalize the proceedings required for PMOI to be able to use loans provided by the Exim Bank of India.

BIM and the Exim Bank of India have had dealings in the past. Following the lifting of international sanctions on Iran, BIM received a $400 million credit line from the bank.

The bank also extended a credit line worth $150 million to Iran in February for supplying 150,000 tons of rail tracks.    

In September, Afkhami announced that BIM is negotiating a $3 billion credit line with a consortium of six European banks to “boost BIM’s lending power, in line with plans to finance industrial units across the country”.

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EconomyBusiness And Markets
Sunday, April 23, 2017

Bank Saderat to Resume Trading This Week

 

Bank Saderat is set to resume trading on Tehran Stock Exchange this week after it published an auditor’s report on its first profit in the current fiscal year (started March 21) on Saturday. Bank Saderat’s trading symbol, alongside those of Mellat, Tejarat and Post Bank, was frozen back in July by the Central Bank of Iran and the Securities and Exchange Organization, Boursepress reported. To end the banks’ practice of giving out dividends that had no real financial backing, they were mandated to prepare their financial statements based on International Financial Reporting Standards. IFRS is a single set of accounting standards, developed and maintained by the International Accounting Standards Board. These standards are now mandated for use by more than 100 countries, including the European Union and by more than two-thirds of the G20 states. Having fixed their books, Mellat and Tejarat returned to trading last year. Their shares nosedived 37.51% and 33.76% respectively upon their opening.

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ate: 22/04/2017 | Time: 19:38|
 

Zarif: Iran tries to remove banking obstacles,develop economic, financial ties with Europe

Tehran, April 22, IRNA -- Foreign Minister Mohammad Javad Zarif said on Saturday that Iran is trying to remove banking obstacles and develop economic and financial relations with the European countries, including Portugal.

 
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According to the report of Foreign Ministry Media Department, Zarif made the remarks in a meeting with Portugal’s Secretary of State for Internationalization Jorge Costa Oliveira, who is heading an economic delegation during a visit to Iran.

He pointed to Iran's measures in the direction of fight against financial support for terrorism and money-laundering and underlined Iran’s seriousness on the issue and continuation of that.

The two sides exchange views and discussed ways to expand economic relations between the two countries.

The Portuguese official also pointed to public and private banks' interests to develop cooperation with Iran, especially Central Bank of Iran, and added that considering necessary financial and economic structures in Iran, there exist possibility to take authorization from Portuguese banks to invest in Iran.

Oliveira said aim of his visit to Tehran is to get acquainted with Iran’s progresses and economic development process.

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No new problems for Iranians in British banking system: Official

London, April 23, IRNA – Managing Director of International Bank Persia Mohammad Reza Meskarian said on Saturday that no new problems have been created for the UK-based Iranians in the country’s banking system.

 
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Closure of certain Iranians’ accounts in Britain is not something new and is mainly rooted in the past, he said, noting, “As far as know, no new problem is there now.”

Closure of certain customers’ bank accounts by UK banks can be linked to financial offensives as well as money laundering, he said, noting that of course, the problem can occur for all other nationalities, he said.

Closure of Iranian nationals’ accounts in the UK banks in the past mainly pertained to the way of transfer or receiving money by them which based on European Union and UK’s regulations were considered illegal, the official said.

Money drafts which are officially deposited in individuals’ accounts in Britain are not illegal from the perspective of British banks and have no problems, but if transfer of money is made in cash or via the exchangers, it will have negative impacts on British banks, which may deal with the owners of such accounts., he said.

Meskarian further noted that blocking certain Iranian nationals’ accounts in times of sanctions are mainly rooted in a series of banking operations at source which did not comply with British banking standards.

However, he said, the issue is not confined to Iran and other countries can encounter such limitations.

Laws pertaining to financial offensives and money laundering are getting further complicated and strict as European banks have been ordered to comply with the regulation No. 4 of money laundering as of June 28, he said.

Based on the British banking regulations, specificity as to the source of 
money is important and has nothing to do with nationality, he said.

International Bank Persia was established in March 2002 as the result of merger of Mellat and Tejarat banks in London.

Bank Persia was sanctioned by European Union in July, 2010, leading to cessation of its activities in London.

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Official: No need for foreign investors concern for sanctions

Tehran, April 22, IRNA -- Deputy Minister of Petroleum for trade and international affairs assured investors that any possible upholding of anti-Iran sanctions would influnece the businesses already existing before.

 
82502405-71558493.jpg

“After the new US president took office, foreign investors questioned investments,' Amir Hossein Zamaninia said on sidelines of the 13th Iran’s International Petrochemical Industry Conference, adding that the uncertainty would be tentative, while Iran’s talks with foreign companies would go on and even would be accelerated, according to the Ministry website.

He also assured service and good providers that the loans related to the services would be refunded, according to the written contracts, in case of any potential snapback of sanctions.

Pointing to 15 neighboring countries in need of natural gas, Zamaninia added that there were satisfactory capacity for investment and business promotion in Iran, given the country’s gas and oil reserves.

'Based on previous experience, transferring downstream industries to Iran from the leading countries is such a demanding task, and requires win-win conditions, benefiting both sides”, explained the Deputy Petroleum Minister.

He maintained that inexpensive feed, available infrastructure, human resources and political and law stability were among the factors making Iran attractive to foreign investors. 

The Iranian official also declared that creating at least 100,000 direct jobs was a goal of the Ministry to be realized by the end of this year (Persian calendar), and said that the number is not a far-fetching one in the oil, gas and petrochemical industries.

He also declared that 150,000 indirect jobs also would be created as a result of implementing the industrial plans.

Iran’s 13th International Petrochemical Industry Conference April 22-23, attended by 385 local and 76 foreign companies kicked off on Saturday in IRIB International Conference Hall, Tehran.

Promoting cooperation, foreign and domestic investment, introducing domestic capabilities, new technologies and facilitation in receiving financial loans, and international insurance are declared as the main goals of the conference.

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Iran, safe way for Vietnam to reach a 400 million market: Trade official

Kuala Lumpur, April 22, IRNA – Chairman of Iran’s Chamber of Commerce, Industries, Mines and Agriculture Gholam-Hossein Shafei says that Tehran can be a short and secure way for Hanoi to have access to a 400 million market.

 
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Shafei made the remarks in a meeting held on Friday with Nguyen Thành Phong, Chairman of People's Committee in Ho Chi Minh City, the largest city in Vietnam.

Iran can be a safe gateway for Vietnam to reach the Economic Cooperation Organization (ECO), the Central Asia region, Caucasus, Afghanistan and Iraq, Shafei said in the meeting.

Instead, he noted, Hanoi can be a gateway for Iran to enter the world’s fifth-largest economic bloc that is the Association of Southeast Asian Nations (ASEAN). 

The senior trade official went on to say that Vietnam is one of Iranian government’s economic targets in new conditions.

Referring to the trip of the Iranian President Hassan Rouhani to Hanoi in October, 2016, and the visit of his Vietnamese counterpart Truong Tan Sang to Tehran in March at the same year, Shafei said that the meetings led to 22 percent increase in trade exchange between the two countries.

Shafei noted that the two presidents have stressed the importance of reaching a two-billion-dollar economic cooperation.

Iran, he stressed, is seeking an effective economic cooperation in the region.

For his part, the Vietnamese side said that his country is willing to widen ties with Iran.

Thành Phong added that he is committed to provide the appropriate ground for the presence of Iranian companies in Vietnam’s Ho Chi Minh City.

About exchange of visits between the two nations’ presidents, Thành Phong said their meetings have led to more closeness between the two sides. 

He further pointed to the issues of trade, energy, industry and information technology as effective in fostering bilateral cooperation. 

Iran’s Shafei at the head of a delegation arrived in Hanoi on Wednesday (April 19). He will leave for Tehran today.

1483**1771

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On 2017-04-22 at 10:27 PM, screwball said:

Iran, safe way for Vietnam to reach a 400 million market: Trade official

Kuala Lumpur, April 22, IRNA – Chairman of Iran’s Chamber of Commerce, Industries, Mines and Agriculture Gholam-Hossein Shafei says that Tehran can be a short and secure way for Hanoi to have access to a 400 million market.

 
82501634-71557000.jpg

Shafei made the remarks in a meeting held on Friday with Nguyen Thành Phong, Chairman of People's Committee in Ho Chi Minh City, the largest city in Vietnam.

Iran can be a safe gateway for Vietnam to reach the Economic Cooperation Organization (ECO), the Central Asia region, Caucasus, Afghanistan and Iraq, Shafei said in the meeting.

Instead, he noted, Hanoi can be a gateway for Iran to enter the world’s fifth-largest economic bloc that is the Association of Southeast Asian Nations (ASEAN). 

The senior trade official went on to say that Vietnam is one of Iranian government’s economic targets in new conditions.

Referring to the trip of the Iranian President Hassan Rouhani to Hanoi in October, 2016, and the visit of his Vietnamese counterpart Truong Tan Sang to Tehran in March at the same year, Shafei said that the meetings led to 22 percent increase in trade exchange between the two countries.

Shafei noted that the two presidents have stressed the importance of reaching a two-billion-dollar economic cooperation.

Iran, he stressed, is seeking an effective economic cooperation in the region.

For his part, the Vietnamese side said that his country is willing to widen ties with Iran.

Thành Phong added that he is committed to provide the appropriate ground for the presence of Iranian companies in Vietnam’s Ho Chi Minh City.

About exchange of visits between the two nations’ presidents, Thành Phong said their meetings have led to more closeness between the two sides. 

He further pointed to the issues of trade, energy, industry and information technology as effective in fostering bilateral cooperation. 

Iran’s Shafei at the head of a delegation arrived in Hanoi on Wednesday (April 19). He will leave for Tehran today.

1483**1771

I knew there was a reason this article stuck in my head. If Vietnam wants this kind of trading to take place then they may need to address there dismal rate of the VND as well. Just a hunch and nothing more, but it did get me thinking.

Thxs SB, great find.

pp

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10 hours ago, pokerplayer said:

I knew there was a reason this article stuck in my head. If Vietnam wants this kind of trading to take place then they may need to address there dismal rate of the VND as well. Just a hunch and nothing more, but it did get me thinking.

Thxs SB, great find.

pp

You're not alone regarding this thought process - hopefully some light would be shed on this soon! :praying:

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Foreign exchange rates should be in line with economic realities but in order to forestall speculative activities, the Central Bank of Iran is keen on curbing the potential volatility that may arise from political events, the governor of CBI said.

"CBI does not predict the currency rates but tries to prevent any shock to the foreign exchange market," Valiollah Seif was also quoted as saying by ICANA.

Iran will hold a presidential election on May 19 in a race where the rivals of incumbent President Hassan Rouhani are attacking his economic record.

Seif noted that it is common in countries with oil revenues to witness shocks in their currency market when the oil price falls, "but we managed the market in Iran to follow a steady trend".

The CBI chief believes that tranquility in the currency market led to a relatively stable economy during the past four years.

"Part of the comments concerning the currency market is a specialized view and acceptable, while others seem to have political motives," he added.

Seif further said CBI's policies are not related to the upcoming presidential elections, but aim to control the market with a reasonable exchange rate.

The Central Bank has managed to control foreign exchange rates and promote stability in the forex market despite a turbulent season that saw the rial drop to historic lows against the dollar.

In the Iranian months of Azar and Dey (Nov. 21, 2016, to Jan. 19, 2017), the currency market witnessed fluctuations that were mainly caused by a peak in seasonal trips (pilgrimages to neighboring Iraq) and the US presidential vote, but the CBI restored stability to the market.

President Hassan Rouhani has described the restoration of market stability after a period of upheaval as the biggest achievement of his nearly four-year tenure that will end in August.

"Although our friends are sometimes divided over the biggest achievement of the government, I believe it's the return of calm and stability to the market," Fars News Agency quoted the president as saying on Feb. 27, 2017.

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Iran's Ministry of Economic Affairs and Finance has published a report detailing the performance of seven Iranian banks in the area of correspondent relations, indicating that the international banking system is gradually warming up to reestablishing ties with the country.

In its report, the ministry outlines the performance of Bank Melli, Bank Keshavarzi, Bank of Industry and Mine, Export Development Bank of Iran, Tejarat Bank, Bank Maskan and Bank Mellat. They have all managed to reconnect with banks of several countries following the easing of sanctions since the implementation of the nuclear accord named Joint Comprehensive Plan of Action on Jan. 16, 2016.

According to the Economy Ministry, from the implementation day till Sept. 21, 2016, Bank Melli established 25 correspondent relations with 25 foreign banks. By the end of the previous fiscal year (March 20, 2016), the bank managed to establish ties with 30 banks and had ongoing negotiations with an additional 110 banks.

"The number of meetings and negotiations with foreign banks has been on the rise in the past few months and the level of banks looking to establish correspondent relations has moved from mid-tier to relatively bigger banks, which indicates a positive outlook for the next year," Mohammad Reza Hosseinzadeh told Shada, the official news service of the Economy Ministry.

He added that the election of Donald Trump as US president initially made a number of banks wary of reconnecting with Iran, "but their doubts have since paled significantly".

Bank Keshavarzi's correspondent relations had dwindled to eight about four years ago at the height of the sanctions, but rose to 50 in the following year. The agent bank of the agriculture industry increased that figure to 99 by the end of last year. During 2013-15, the ministry reports, the Bank of Industry and Mine only had correspondent relations with three Chinese, Iraqi and Russian banks. The number of BIM's foreign correspondent banks reached 75 by the end of the previous year, including with lenders from Germany, Italy, Spain, France, the UK, China, Switzerland and Russia.

 Considerable Increase

The Economy Ministry notes that the Export Development Bank of Iran has made "significant achievements", as the bank's correspondent relations spiked from only six banks under the intensified pressure of international sanctions to 75 banks by the start of the second half of the previous fiscal year in September.

Tejarat Bank counted only one correspondent bank on its list when sanctions were at their worst, "but from February 2016 until Sept. 20, 2016, it succeeded in establishing ties with 65 active correspondents".

Before the implementation of the nuclear accord, Bank Maskan's correspondent relations were limited to five banks, one each from Turkey, China, South Korea, Japan and the UAE. However, the agent bank of the housing sector established ties with 11 banks of Germany, Spain, Belgium, Austria, Switzerland and Thailand after JCPOA and "estimates of the bank show that the number of its correspondent relations reached 15 by March 2017".

Bank Mellat had only 12 correspondent relations at the onset of the sanctions-era and as a result of its disconnection with SWIFT interbank network, but the figure increased to 45 by the time sanctions were being lifted.

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The Islamic Republic of Iran made exporting and importing easier by expanding the services offered by the national single window, said the World Bank in its Doing Business 2017 report for the Middle East and North Africa, acknowledging the fact that the country has taken strides to improve its status when it comes to "trading across borders".  

WB's Doing Business sheds light on how easy or difficult it is for a local entrepreneur to open and run a small- to medium-sized enterprise when complying with relevant regulations. It measures and tracks changes in regulations affecting 11 areas in the life cycle of a business, including  starting a business, receiving construction permits, getting electricity, registering property and  getting credit.

Among other factors, the bank adds that Iran has also made getting electricity easier by eliminating the need for customers to obtain an excavation permit for electricity connection works.

"The Islamic Republic of Iran made starting a business easier by streamlining the name reservation and company registration procedures.

[It] strengthened investor protections by requiring greater immediate disclosure of related-party transactions," the report adds.  

 

According to the global institution's influential report, Iran eased the launch of business startups by installing a web portal allowing entrepreneurs to search for and reserve a unique company name for 2017.

"The establishment of a new private credit bureau improved access to credit information," it said.  

The Islamic Republic of Iran made enforcing contracts easier and faster by introducing electronic filing of some documents, text message notification and an electronic case management system.

The country made starting a business easier by streamlining the name reservation and company registration procedures, WB said.  

Among less business-friendly points, the bank also noted that Iran has made starting a business more difficult by requiring company founders to obtain a criminal record clearance to register a new company.

According to the report, in economies around the world, trading across borders as measured by Doing Business has become faster and easier over the years.

Governments have introduced tools to facilitate trade by setting up single windows, risk-based inspections and electronic data interchange systems. These changes help improve their trading environment and boost firms’ international competitiveness.

The WB report also records the time and cost associated with the logistical process of exporting and importing goods.

Under the new methodology introduced this year, Doing Business measures the time and cost associated with three sets of procedures—documentary compliance, border compliance and domestic transport—within the overall process of exporting or importing a shipment of goods.

The ranking of economies on the ease of trading across borders is determined by sorting their distance to frontier scores for trading across borders. These scores are the simple average of the distance to frontier scores for the time and cost for documentary compliance and border compliance to export and import.

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The Central bank of Iran is determined to navigate moneychangers back to their original activities and leave banking operations to banks, said the head of the Department for Banking Supervision at CBI.

"For a period of time, due to certain reasons, we had to transfer money overseas through the money exchange houses but now our banking system is back to a reliable point. As the governor of CBI emphasized, exchangers should put an end to their banking activities so the banks are able to reclaim their role in the market," Abbas Kamarei was also quoted as saying by IBENA.

Addressing moneychangers' concerns that pushing them out of banking activities would weaken their position, he said, "There was a time when policymakers deemed it right to delegate some important tasks to exchangers and we witnessed the positive and negative outcomes. Now the policymaker has decided another way to handle things and it is not acceptable for moneychangers to complain."

The official said if moneychangers believe their market is not lucrative enough, they could quit.

"The most important thing for Iran's economy is transparency since when it's lacking, some benefit and more lose," he added.

Kamarei said there have been a number of exchangers that did not abide by the rules last year and as a result faced punishments, leading to the closure of 10-12 of them.

Back in July, the banking system got the thumps-up from CBI to trade in foreign currencies at the open market rate.

The Central Bank of Iran recently invited businesses to procure their currency requirements from the banking system at market rates. The proposal was received well and is deemed a prelude to the longstanding plan to unify the dual exchange rate regime in the Iranian market.

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The Central Bank of Iran has notified regulations for digital and mobile payments to the banking network.

According to CBI's website, the technology to be used in the payment process is called "tokenization" in which sensitive information like card numbers or passwords are substituted with secret digital tokens.

The service, which would increase the security of payment system to global levels while easing mobile payments, is predicted to become available by May 21.

The directive noted that "although innovation leads to improvement, the security of payment system and risk management should take priority".

CBI has been closely monitoring the latest technological changes and incorporating the ideas of experts and banking officials. It finally came up with the tokenization process for digital and mobile payments.

According to the statement, the tokenization process works as follows:

*A part of the users' sensitive data will be shown as digital tokens. The data will be transferred to the national payment network where digital tokens get back to their original form in a secure area and the payment process continues as normal.

The Tokenization Center–also known as MANA– is responsible for changing the form of the sensitive data to digital tokens and vice versa. Banks can use their own MANA or outsource it to other approved centers, but they are fully responsible for users' data security.

Token Guidance System is named SAHAND, which is embedded in the national payment infrastructure.

MANA gets access to the payment system only through SAHAND.

Tokenization is only available through MANA whose technology and implementation process have been approved by CBI.

Mobile payments have a daily limit in tokenization system and banks or credit institutions in charge of the payment process must abide by the limit.

Further instructions will be announced by CBI's Department of Innovative Technologies.

Banks need to follow the new digital and mobile payment system and inform CBI of their design and implementation process.

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Iran’s Forex Market Assessed
Iran’s Forex Market Assessed
  1. Economy
  2. Domestic Economy
Saturday, April 29, 2017

Iran’s Forex Market Assessed

 
The drop in the supply of foreign exchange coupled with increased demand by commercial companies for their international settlements exerted an upward pressure on the exchange rate
 

In its latest quarterly report on Iran’s economic performance, the Middle East Bank reviewed fluctuations in the country’s foreign exchange market in the last Iranian year (ended March 20, 2017).

According to the report, the US dollar/rial market exchange rate, which surpassed 39,000 rials in Q3 of the last Iranian year, surged to 41,450 rials in the first week of Q4 to mark the maximum nominal exchange rate of the dollar since President Hassan Rouhani took office in Aug. 2013.

The drop in the supply of foreign exchange as a result of petrochemical companies’ reluctance to exchange their export proceeds in the hope of benefiting from the surge in this exchange rate, coupled with rising demand by commercial companies for their international transactions, exerted upward pressure on the exchange rate in Q3 of the last Iranian year and the first week of Q4.

Expectations of the dollar further strengthening against rial also had its share. The Central Bank of Iran’s intervention brought this rate down to below 40,000 in the second week of Q4.

In the final month of the last Iranian year, this rate dipped below 38,000 rials and fluctuated around 37,700. Graph 1 exhibits the daily market and official exchange rates in the second half of the last Iranian year.

As observed in Graph 1, in contrast with the market exchange rate, its official rate did not experience much change in the second half of last year and on average increased by less than 1% a month during the last five months of the year.

These developments have widened the gap between the official and market exchange rates from 14% at the beginning of fall to 16.4% at the end of winter, making it more difficult for CBI to proceed with its long-overdue exchange rate unification.

Graph 2 depicts the average annual inflation rate and the average growth rates of official and market exchange rates in 12-month periods culminating in the last day of each month in the past two years.

As can be seen in Graph 2, the domestic annual inflation rate increased to 9% in the final month of the last Iranian year after remaining at 8.6% for three months. The inflation rate is expected to rise further in the current Iranian year and this would raise the exchange rate if CBI does not intervene in the market.

Apart from the domestic inflation rate and CBI’s policies, uncertainties related to the new US administration’s policy toward Iran and the nuclear deal are among factors affecting exchange rate developments.

CBI planned to change the currency in reporting foreign trade statistics from dollar to other foreign currencies at the end of the last Iranian year.

Since Iran’s international trade is mainly with European countries and China, the dollar accounts for a small proportion of Iran’s international transactions. As the dollar’s exchange rate against other major currencies has been volatile in recent months, reporting all foreign revenues in terms of dollar will result in imprecise figures in income statements.

From CBI’s point of view, it is more preferable to report foreign revenues in terms of a currency with low volatility. On the other hand, CBI likes to lighten the dominant role of dollar in the formation of domestic inflation expectations.

The change in reporting currency can be implemented by either selecting “the foreign currency with the highest share in international trade” or a “basket of currencies”.

According to CBI authorities, the change in reporting currency will reduce fluctuations in foreign exchange market.

But this expectation may not be realistic, as changing the reporting currency is an accounting issue that will only result in nominal changes rather than real ones.

 

 
 
 
 
 
 
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