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2 hours ago, screwball said:

Think imf....Asia....emerging economy....Indonesia rupiah definitely worth a look at after dinar and rial...https://www.bloomberg.com/news/articles/2016-12-19/indonesia-s-central-bank-revives-plan-to-redenominate-rupiah

 

they have oil and gas and are one of the fasting growing economies in Asia 

 

Good tip. Thanks SB. 

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5 hours ago, screwball said:

Think imf....Asia....emerging economy....Indonesia rupiah definitely worth a look at after dinar and rial...https://www.bloomberg.com/news/articles/2016-12-19/indonesia-s-central-bank-revives-plan-to-redenominate-rupiah

 

they have oil and gas and are one of the fasting growing economies in Asia 

I believe that I recently read that they are going to LOP . So please do your research first before you buy,

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On 7/27/2017 at 7:24 AM, climber7 said:

new currency leave us screwed

IMO....with Iran being consider #1 supporter of terrorism. Trying to exchange them won't be worth the effort. Association can lead to turmoil....

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12 hours ago, millionaire in training said:

I believe that I recently read that they are going to LOP . So please do your research first before you buy,

Like I said do you one research...

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8 hours ago, yota691 said:

IMO....with Iran being consider #1 supporter of terrorism. Trying to exchange them won't be worth the effort. Association can lead to turmoil....

So they say no evidence...but then we can have double standards one for Saudi Arabia and one for Iran...all these years of sanctions on Iran and yet 9/15 terrorist involved in sept 11 are from Saudi Arabia...so who is it that funs terrorism? It's only the us that can't trade...Asia and Europe are going great guns..do your own research..

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7 hours ago, screwball said:

.do your own research..

I have or I wouldn't stated what I said. Do what you want by all means, and the Best of Luck with that...

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The Central Bank of Iran has notified an executive directive to seven banks for allocating a major portion of their annual budgets for creating sustainable jobs through loans and incentives.

“The executive directive for clauses A and B of Note 19 of the 2017-18 annual budget has been notified to Bank Melli Iran, Bank Sepah, Bank Refah, Bank Mellat, Bank Saderat, Tejarat Bank and Cooperative Development Bank for implementation,” CBI announced on its official website.

The two clauses allow the government to devise policies and plans for creating new and sustainable jobs and use the support of various organizations, banks and executive branches in line with “democratizing the economy, maximizing economic participation, employing the vast potentials of the active population of the country and using the competitive capacities of various regions in Iran (by prioritizing rural and underprivileged regions)”.

To do this, the administration of President Hassan Rouhani must devise and communicate investment priorities for different fields of activities in provinces in collaboration with the private sector and cooperatives, create capacities for the active participation of target communities through executive entities and create potentials in rural regions and target communities.

The budget also bounds the government to disclose information on financial incentives, utilize each of its executive entities to continuously and comprehensively provide financial support, promote recovery in housing, construction and public services sectors, and prioritize small- and medium-sized enterprises and handicrafts for allocation of incentives.

As the budget itself asserts, the executive directive includes “forms of financial support depending on regions, amount of loans and legal and real persons” based on suggestions made by the Management and Planning Organization and in collaboration with relating executive entities i.e. the central bank.

The executive directive notified by the CBI indicates that after the approval in expert committees of the High Council for Employment, projects eligible for loans will be introduced to the seven agent banks by the employment task groups of their respective provinces.

The agent banks will then review and approve or disapprove the loans for a project at most within a month from the completion of the related documents “within the framework of banking regulations, which correspond with rates approved by the Money and Credit Council”.

MCC, a top-tier financial decision-making body with the CBI, set bank interest rates at 18% in its meeting of last July.

According to the CBI directive, if the applicant for the loan is eligible to receive subsidies, the amount of the subsidy will be wired to the account of the applicant by the Ministry of Cooperatives, Labor and Social Welfare at the end of the project.

In conclusion, the seven agent banks have been obligated to send monthly performance reports on projects and the use of loans to the central bank.  

 

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Bank Parsian is to open its second branch in Iraq in the foreseeable future, a member of its board of directors said. “In line with answering the need for transferring foreign currencies, we have strived to establish a broad foreign network and that is why we will soon open a branch in Najaf,” Abbas Khosravani was also quoted as saying by ILNA. This will be the second branch of the Iranian lender in Iraq, the other being in Baghdad. “We are also reviewing the possibility of opening new branches in Europe,” he added. BMI, Iran’s biggest lender, is also planning to open a branch each in the holy cities of Najaf and Karbala.

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The central bank will have the authority to change the caps on the ratio of debts and assets held in foreign currencies at any given time.
The central bank will have the authority to change the caps on the ratio of debts and assets held in foreign currencies at any given time.
Sunday, August 06, 2017

CBI Updates Banks’ Foreign Exchange Rules

CBI has tweaked regulations that will effectively dictate how much debts and assets each bank or non-bank credit institution can hold
 
 

In its latest directive, the Central Bank of Iran has raised the limit on the maximum amount to which the ratio of debts and assets held in foreign currencies by all banks and certified non-bank credit institutions can rise.

"With the aim of reviewing and updating regulations pertaining to the net open positions, the central bank has communicated its Directive on Net Open Positions of Credit Institutions to the banking system," CBI announced in a statement on its official news website.

Net open position indicates the net sum of all foreign currency assets and liabilities of a bank or financial institution, inclusive of all of its spot and forward transactions and off-balance sheet items in that foreign currency.

The new directive was first devised more than a decade and a half ago and had not been updated since because of "fluctuations in the foreign exchange market conditions of the country as a result of internal and external factors in recent years".

However, because currency fluctuations exert an influence over the conditions of assets and debts held by lenders, CBI has renewed its directive "in line with the standards of the Basel Committee on Banking Supervision and also by reviewing the regulations of other countries and considering the conditions of Iranian credit institutions".  

In the directive, the central bank has devised caps for the positive and negative net open positions for credit institutions in "important currencies", namely the US dollar, euro, British pound, Swiss franc and Japanese yen.

The positive net open position is the ratio of the rial equivalent of total assets of a credit institution and the commitments of its customers to the rial equivalent of the total debts and the commitments of credit institution in the same currency.

Meanwhile, the negative net open position is the ratio of the rial equivalent of total debts and commitments of a credit institution to the rial equivalent of total assets of the credit institution and the commitments of its customers in the same currency.

The CBI has decreed that the allowed positive and negative net open positions of each currency can reach a maximum of "15% of the base capital of the credit institution", effectively setting a cap for the ratio of debts and assets.

The directive has ruled that the positive and negative open positions of the credit institutions for all currencies must not go beyond 35% and 30% of base capital respectively.

The positive and negative open positions for all currencies are calculated by adding the total sum of the positive and negative net open positions of the institutions respectively.

However, any bank or non-bank credit institution that boasts a better capital adequacy ratio than the ratios previously decreed by the central bank in line with international standards has been allowed to raise all its net open positions by 5%, meaning that it will effectively be allowed to hold higher debts and assets.

As the latest directive notes, CBI will have the authority to change the caps at any given time "considering market conditions or based on the performance of each credit institution".

What is more, the central bank has decreed that the net open positions for gold will be calculated based on a directive that was first devised by the Money and Credit Council–a decision-making body headed by CBI governor–some 25 years ago and was last updated in the previous year.

The aforementioned directive asserts that "the value of the total of gold, silver, and platinum assets of each bank must never violate 10% of the paid-up capital and free assets of the bank, unless with the special permission of the central bank".

As per the new CBI directive, all banks and credit institutions have been obligated to calculate their net open positions on all currencies and their gold reserves on a daily basis and draft thorough monthly reports that are to be sent to CBI by the middle of the next month.

The central bank will be the official entity that calculates the exact amount of the debts and assets of each bank and credit institution, and will communicate the amounts to them within one month.

"The violation of the directive will face disciplinary measures devised within the framework of regulations," it concluded.

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As part of an overarching policy of reforming the banking sector, the Central Bank of Iran has issued two executive directives concerning capital adequacy and international conformity standards for credit institutions and formation of credit cooperatives.

The Directive for Calculating Capital Adequacy Ratio of Credit Institutions has been notified to the banking system with the aim of increasing the conformity of lenders with new international standards "with an eye on the country's special conditions ", according to the official news website of the central bank.

Inspired by regulations of a number of internationally accepted documents, namely IFSB-15, Basel II, Basel III, and regulations of other countries, the revised directive has been approved in the latest session of the Money and Credit Council.

IFSB-15 was published in 2013 and constitutes a revised capital adequacy standard for institutions offering Islamic financial services while the Basel standards are a comprehensive set of reform measures developed by the Basel Committee on Banking Supervision to strengthen the regulation, supervision and risk management of the banking sector.

The last such directive issued by CBI dates back to 2003, which was the basis of operation for Iranian lenders before the notification of the new regulations.

Adhering to the new regulations will gradually help Iran upgrade financial transparency and conform to modern banking standards, which will be a significant step for the country as it needs a better standing in intergovernmental institutions such as the Financial Action Task Force.

This will help reconnect the Iranian banking sector to the international system and encourage major lenders in reestablishing correspondent banking ties with their Iranian counterparts, the lack of which has currently been identified as the source of many of the nation's problems.

The new directive obligates banks to balance their resources based on various forms of risk, including credit risk, market risk and operational risk, and set their required capital for covering operational and market risks. Previously, their resources were strictly balanced based on credit risk.

On the other hand, because local methods of rating and independent rating institutions are absent in Iran, CBI has directed lenders to "employ a simple measure for calculating credit risk".

It also directs the banks to create a data system within six months containing information on their capital and risk ratio, which could be requested at will by the central bank at any given time.

The banks are now obligated to reach a certain level of capital within a timeframe provided in the directive and should they fail to do so, "CBI has defined preventive or punitive measures".

Organization of Credit Cooperatives

The Executive Directive for Establishing, Operating and Supervising Credit Cooperatives has been upgraded and communicated to cooperative offices affiliated to the Ministry of Cooperatives, Labor and Social Welfare.

It has been devised using experiences gathered as part of the previous directive and suggestions made by the ministry, and deals with existing and planned credit cooperatives.

Firstly, the directive states that in order to organize the monetary and banking system of the country and prevent the formation of unregulated and unsystematic credit cooperatives akin to the past, "credit cooperatives can henceforth be established as credit cooperatives of occupational groups".

Such cooperatives are established to fulfill the credit and financial needs of a particular occupation by collecting small investments from the members and lending it to other members. They provide money for workers, teachers and staffs of state bodies or private institutions.

Furthermore, "credit cooperatives have now been limited to accept deposits and allocate Qarzol-Hassanah (interest-free) loans".

The CBI directive also notes that any credit cooperatives of occupational groups, which are to be formed from now on, must have at least 50 members.

With this number of members, they must boast a minimum capital of 500 million rials ($13, 300) while for each additional member, 10 million rials ($266) will be added to their initial capital.

Cooperatives formed prior to the issuance of the directive have been instructed to adapt themselves to new guidelines within a year and obtain a new license of operation from the central bank. If they fail to get a permit, CBI will stop their activities.

Based on a memorandum of understanding signed by CBI and the Ministry of Cooperatives about two years ago, a total of 600 credit cooperatives will be authorized to operate in the money market.

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With the key promise of unifying the country's dual exchange rates lying dormant during President Hassan Rouhani's first term in office–despite frequent pledges to do so–the Central Bank of Iran's top policymaker says the issue has not been finalized and will be pursued during the administration's second four-year term.  

The longstanding plan to adopt a "managed floating rate" failed due to what officials refer to as lackluster international ties. The setback disappointed the country's private sector and leading business figures who had hoped for a single exchange rate regime after the country had reverted to multiple rates when sanctions targeting the country's nuclear program intensified.    

"Based on our plans, the unification of foreign exchange rates will be implemented early in the new government," CBI Governor Valiollah Seif said in a late night interview with the state TV.

He and several other high-ranking officials had projected that the rates would be unified by the end of the previous fiscal year in March, following the implementation of Iran's nuclear accord with world powers, which promised vastly improved prospects for the Iranian economy.

However, as Seif concedes, it has taken much longer than anticipated for the Iranian banking system to reconnect with major international counterparts, effectively preventing the rate unification.

"We thought that following the nuclear deal, our banking ties would once again stand at a suitable level and we can unify the rates, but the plan is yet to be implemented because it has been delayed as a result of a lack of international ties," he said.

The CBI chief pointed to the position of Iran with regard to the Financial Action Task Force, the global standard-setting body on combating money laundering and financing of terrorism, which in late July voted to extend the suspension of active countermeasures against Iran indefinitely as it had done a year before.

Seif said the country is continuing measures in line with boosting conformity with FATF standards and predicted that the intergovernmental organization is expected to treat Iran better in its future meetings.

"While there is also a political factor in addition to the technical factor with regard to FATF decisions, our view is technical," he added, echoing past remarks by many top Iranian officials who have condemned lobbying by the US and a number of other nations for Iran to be kept on the blacklist of violating countries.

Inflation

Seif, who also heads the Money and Credit Council tasked with financial decision-making, focused attention on the inflation rate, saying that in light of the fact that point-to-point inflation is experiencing a downtrend and will continue to do so for the next few months, "we will return to single digit inflation rates again".

While the inflation rate stood at 9% at the end of the previous fiscal year, it began to rise during the early months of the current year to go back up to double digits two months ago.

The CBI chief also referred to a major government scheme last year, which mobilized the banking system to allocate 178 trillion rials ($4.6 billion) to ailing small- and medium-sized enterprises.

He noted that the plan will continue this year with another 300 trillion rials ($7.9 billion) earmarked for SMEs while "an additional 200 trillion rials ($5.2 billion) worth of loans have been agreed upon with the Ministry of Cooperatives, Labor and Social Welfare with the aim of supporting job creation".

According to Seif, Iranian banks handed out a total of 5.48 quadrillion rials ($144 billion) in loans last year while their target for the current year to March 2018 was set at 6.71 quadrillion rials ($176 billion).

Shadow Bank Consolidation

The CBI governor also discussed in length the situation of uncertified credit institutions that had absorbed the deposits of thousands of people and created many problems for the banking system.

"The management brass at the Bank Mehr Eghtesad has done well and the lender is supposed to be merged along with Samen and Kosar credit institutions," he said.

Seif reiterated what he had announced days ago that with the last three illegal credit institutions sorted out, the saga of shadow banks has come to an end and referred to it as one of the major achievements of the central bank.

Uncertified institutions had proved a bane for the banking system as lenders were forced to pay higher interests on deposits to match their illegal counterparts.

As Seif noted, an unnamed institution was promising an interest rate as high as 84% to attract deposits.

While lenders now pay interests on deposits at 15% at present, the official pointed out that "about 50-60% of the assets of the banking system are frozen in the form of soured properties and non-performing loans".

Seif pointed to a significant discrepancy between the account of the banking system and the Ministry of Economic Affairs and Finance on how much the administration owes the banks.

While the banking system claims 1.45 quadrillion rials ($38 billion) of arrears on the part of government, the ministry puts the figure at 870 trillion rials ($22.9 billion) by the end of the fiscal 2014-15.

Seif said the huge gap is because the administration has not calculated interest on the arrears or has come up with the figure for the debts at very low interest rates.

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On July 27, 2017 at 7:24 AM, climber7 said:

Could someone please address the question I've asked twice regarding what SPECIFICALLY happens to our rials when they switch to the toman? 

 

Does the switch to the new currency leave us screwed with worthless paper money no longer recognized? Will we be able to switch our rials for tomans?  What will be THAT exchange rate and will we be able to make money on it? 

 

Thanks and much appreciated 

  Hi Climber, This is the best explanation that I have found so far. 

 

 

"THE TOMAN IS A HIGHER DENOMINATION NOT A DIFFERENT CURRENCY. ITS LIKE GOING FROM A TEN DOLLAR BILL TO A 100 DOLLAR BILL. IT IS A TEN FOLD INCREASE OF VALUE". 

IMO

DOC

 

So to answer your ??????  "NO we are NOT SCREWED" . This will be a transition from one form of currency to another and they will honer both at the same time.

No one needs to exchange from rials to tomans to be able to make a profit.

Just sit tight and wait for the rate to "come out and go up " to what you feel comfortable exchanging at ....and then... do so.

 

People are getting tooooooo confused over this rial / toman topic and it's really very simple.

 

Just my :twocents: with a little help from BackDoc.

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2 hours ago, millionaire in training said:

  Hi Climber, This is the best explanation that I have found so far. 

 

 

"THE TOMAN IS A HIGHER DENOMINATION NOT A DIFFERENT CURRENCY. ITS LIKE GOING FROM A TEN DOLLAR BILL TO A 100 DOLLAR BILL. IT IS A TEN FOLD INCREASE OF VALUE". 

IMO

DOC

 

So to answer your ??????  "NO we are NOT SCREWED" . This will be a transition from one form of currency to another and they will honer both at the same time.

No one needs to exchange from rials to tomans to be able to make a profit.

Just sit tight and wait for the rate to "come out and go up " to what you feel comfortable exchanging at ....and then... do so.

 

People are getting tooooooo confused over this rial / toman topic and it's really very simple.

 

Just my :twocents: with a little help from BackDoc.

 

Thank you for that MIT

 

Hope it's completely accurate--and happens SOOON!! :P   

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fter Iran ditched the US dollar in its financial reporting and the Central Bank of Iran is pursuing the policy to sideline the greenback in its forex transactions in response to US restrictions, Iran's Economy Minister Ali Tayyebnia said the lion's share of the country's dealings are now conducted with euro.

"At present, a majority of our transactions take place with euro, which has caused a significant decrease in transaction costs compared to the past," Tayyebnia was also quoted as saying by IBENA.

The minister made the statements on the sidelines of the latest joint meeting between the government and private sector representatives, an occasion which served as his valedictory as he is not included in President Hassan Rouhani's Cabinet list announced on Tuesday.  

The Tehran University professor is to be replaced by the head of Iran Customs Administration, Masoud Karbasian, if the latter wins the parliament's approval in the coming days.

Tayyebnia added that banking ties with European lenders are underway using eurozone's single currency while dollar transactions are still problematic as a result of decades-old US sanctions.

The policy of employing euro first gained momentum when CBI Governor Valiollah Seif announced in late January that Iran would stop using the US dollar in its financial and foreign exchange reports as of March 2017.

In early April, CBI emphasized that it has been and will continue to dilute the greenback's role in its foreign exchange basket.

Seif said it would be illogical for the US dollar to be used as the base currency for economic reports since it makes up a meager portion of the country's foreign trade.

"We have to set a currency as the basis of financial reporting, which has better stability and wider use in our foreign trade," he said.

At Monday's meeting, which was held at the Iran Chamber of Commerce, Industries, Mines and Agriculture and attended by ICCIMA chief, Gholamhossein Shafei, Chairman of Majlis Economic Commission Mohammad Reza Pour-Ebrahimi and CBI Vice Governor Akbar Komijani among others, Tayyebnia reviewed the four-year performance of his ministry and weighed in on a variety of subjects.

Challenges & Prospects

Tayyebnia noted that the administration of President Hassan Rouhani has managed to instill a relative stability in the economy and identified botched privatization and high dependence on oil income as the country's major problems that must be tackled.

He stressed that oil is a "generational asset" that when sold, must not be entirely splurged on the current generation.

"Oil revenues should be saved with the National Development Fund of Iran and invested in places that strengthen the role of the private sector in the economy," he said.

The outgoing minister conceded that the Iranian banking system is facing many hurdles, including a stubborn credit crunch, but added that such problems will not be resolved by grandstanding, making baseless criticism and denouncing bank CEOs.

"Increasing the capital of banks is much more important than launching a new project," he said.

Tayyebnia referred to the development of debt market, which has recently gathered pace as the administration has issued bonds to sell its debt.

"The debt market in its current form has been unprecedented in the country. During the fiscal 2015-16, it was worth 100 trillion rials ($2.62 billion) and in 2016-17, it was valued at 280 trillion rials ($7.34 billion)," he said.

"The first priority of the government in entering the bonds market was to finance the private sector."

Tayyebnia said organizing government debts, preventing the pileup of further debts and making up for budget deficits were other reasons behind the debt market move.

The head of the Majlis Economic Commission echoed Tayyebnia on oil, referring to a 10% increase in the share of oil revenues in the annual budget as a negative point.

"However, the increased 1.16 quadrillion rials ($30.4 billion) share of taxes in the 3.46 quadrillion rials ($90.7 billion) budget, which equals about 35%, was a significant achievement realized during the first term of the [Rouhani] administration," Pour-Ebrahimi added.

The ICCIMA chief, on the other hand, spoke of the benefits of these joint meetings that reached 69 in the last four years, saying it provided a constructive channel and created a positive dialogue between the government and the private sector under the chairmanship of Tayyebnia.

However, Shafei also noted that in spite of all efforts by the Economy Ministry, the private sector remains vastly dissatisfied with the progression of divesting government enterprises to the private sector.

Tayyebnia was commended for his distinguished four-year public service at the meeting, which was attended by many private sector members, judiciary officials and lawmakers.

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EconomyBusiness And Markets
Wednesday, August 09, 2017

New Forex Deputy at CBI 

 

In an official decree, Governor of the Central Bank of Iran Valiollah Seif has appointed Seyyed Ahmad Araqchi as the new CBI deputy for foreign exchange affairs. Araqchi obtained his bachelor’s degree in economics from Shahid Beheshti University and his master’s in economics from Tehran University, according to the official website of the central bank. He obtained another master’s degree in financial management from New York University. Araqchi replaces Gholamali Kamyab who has been appointed CBI’s deputy for international affairs. Araqchi has held several official posts prior to his promotion to the new CBI job, namely board membership and senior executive deputy at the Securities and Exchange Organization of Iran.

 
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After a joint meeting held by the members of Majlis Economic Commission, CEOs of state-owned banks and officials of Economy Ministry to discuss different aspects of interest rate cuts, the head of the commission announced the establishment of a committee to further pursue the matter.

"A comprehensive report on the banking system was presented in the meeting and we decided to form a committee comprising representatives of the Central Bank of Iran, Majlis Economic Commission, Ministry of Economy, Associations of Private and State-Owned Banks, and Management and Planning Organization to find solutions to cut interest rates on banks and credit institutions' deposits and present it in the next meeting," Mohammad Reza Pour-Ebrahimi was also quoted as saying by ICANA.

After a long debate, the negotiations did not yield any results and hence the proposal to form the committee.

The report also mentioned that members of the aforementioned committee will include CBI officials, Mohammad Reza Hossein-Zadeh, Bank Melli's CEO who is also the head of state-run banks' association, the head of Private Banks' Association, Kourosh Parvizian, and Mohammad Hossein Hossein-Zadeh, the head of the commission's Monetary and Banking Committee.

The late Monday meeting was chaired by Pour-Ebrahimi, according to whom top issues of the banking system, especially cutting bank deposit rates, were discussed.

 "High bank interest rates have created a number of problems for banks' operations," Pour-Ebrahimi added.

The head of the commission noted that reducing bank interest rates in line with the inflation rate could have positive results for the country's economy.

"Reasons behind the jump in bank interest rates were assessed during the meeting and banks presented their reports regarding the issue," he said.

Representatives of CBI, Economy Ministry and associations of private and state-owned banks also reported on their efforts in determining interest rates.

"We are trying to devise a schedule to bring down the interest rate on deposits since it has also affected loan rates, which have harmful effects on the economy and even challenge banks themselves," he said.

Pour-Ebrahimi emphasized that if the illegal money market is pushed aside, it would be impossible for interest rates to go up unchecked.

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Afutures currency market aimed at unifying the dual foreign exchange rates will be established in the current fiscal year (March 2017-22), a senior official at the Tehran Chamber of Commerce, Industries, Mines and Agriculture said.

"To unify the foreign exchange rates, regulations and provisions for offering foreign currency in bourse have been devised and were projected to come into force in the previous year (ended March 2017), but were postponed to the current year to exercise caution," Seyyed Hossein Salimi was also reported as saying by the official news website of Iran Chamber of Commerce, Industries, Mines and Agriculture.

As the official outlines, the establishment of futures market will mean that foreign exchange rates will be determined by supply and demand.

"In tandem with the support of Central Bank of Iran, the exchange of state-owned and export currencies in the bourse will kick-start forex rate unification," he said.

Unifying the official and free market currency rates in Iran was one of the main missions of the central bank, which was not accomplished during the first four-year tenure of President Hassan Rouhani. But a few days ago, CBI Governor Valiollah Seif renewed his pledge to unify the rates "early in the new administration".

However, as Salimi notes, forex rate unification will not end rate fluctuations, as the price gap between the official and market rates will be eliminated, but the single rate that remains will not stay the same for long.

That is because the discrepancy between internal and external inflation rates must be implemented in currency rates while "market supply and demand will also play a significant role in deciding the rising or falling trajectory of the foreign exchange rates".

The TCCIMA official elaborated that under the current circumstances where Iranian industries require foreign finance for undertaking investments and renovating their production lines, if they have access to enough currency from non-oil exports or oil sales, prices will remain relatively stable.

Salimi concluded that a supply deficit will send prices on a rising trajectory.

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EconomyBusiness And Markets
Thursday, August 10, 2017

CBI Monetary Discipline Defended

 

In response to criticisms directed at the Central Bank of Iran over a surge in liquidity, the bank has stressed that it has maintained order in the money market and staunched the irregular expansion of monetary base.

“Comparing the homogeneous monetary figures during the tenure of President Hassan Rouhani [2013-17] with those of previous administrations would deflect any accusation of [monetary] indiscipline,” Abolfazl Akrami, the head of CBI’s Economic Office, was quoted as saying by ISNA.

The official emphasized that the comparisons of monetary figures must be based on homogeneous variables, meaning the growth of macro-monetary variables [liquidity and monetary base] and the number of banks and credit institutions in the same period must be accounted for.  

In response to accusations of excessive money-printing, Akrami said volume-based comparisons and growth in economic variables are not good indices to measure the monetary situation.

“The average homogeneous growth in monetary base during the first and second terms of former president Mahmoud Ahmadinejad (2005-9 and 2009-13) respectively stood at 32.1% and 17.3% while the figure was 16.4% during the[the first term of the] the presidency of Hassan Rouhani (2013-17),” he said.

According to CBI’s statistics, the volume of monetary base during the year to March 19, 2016, reached 1.79 quadrillion rials ($46.9 billion) with the six new banks and four new credit institutions that were established or licensed during the year to March 20, 2013, accounted for 136 trillion rials ($3.56 billion) of the amount.

“If we exclude the added monetary base of new banks and credit institutions from the total figure, the volume of monetary base by the end of the year to March 20, 2016, would have reached 1.66 quadrillion rials ($43.5 billion),” Akrami added.

The head of CBI’s Economic Office noted that the comparison of figures will not only refute accusations of CBI’s indiscipline, but will also clarify that CBI has managed to bring order to the money market and curbed the high average growth in the monetary base that stood at 24.5% during the previous administration while the figure dipped to 16.4% during President Rouhani’s tenure.

The volume of liquidity during the eight-year tenure of former president registered an annual growth of 26.1%. The increase in monetary base accounted for 24.5% of liquidity growth while the growth of multiplier only reached 1.4%.

 Liquidity increased by 25.3% year-on-year during the first tenure of Rouhani’s presidency but in this case, multiplier and monetary base accounted for about 8% and 17% of liquidity growth, respectively.

Akrami emphasized that according to banking and economic experts, the composition of liquidity is much better than what it used to be.

“We have tried to focus on using the money that is already circulating in the market and reduce the injection of CBI’s money into the market,” he said.

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President Hassan Rouhani submitted on Tuesday the list of his new Cabinet picks to the parliament for a vote of confidence.

Among the nominees, Minister of Roads and Urban Development Abbas Akhoundi, who has been leading the ministry over the past four years, is widely tipped to be reappointed.

As expected, ahead of the confidence vote, the minister has released his plans for the upcoming four years as follows:

  Railroads

Akhoundi said he plans to develop Iran’s rail infrastructure and increase the length of main lines to 13,000 kilometers.

Iran has 3,500 kilometers of railroads under construction.

The minister earlier said the government would operate 1,800 kilometers of railroads by the end of the current Iranian year (March 20, 2018), of which more than 900 km pertain to double tracking.

The government has prioritized rail connections between five provincial capitals.

In May, a 267-km line between Tehran and Hamedan’s provincial capital came on stream. Four other provincial capitals have been planned to join Iran’s rail network by March 2018. These projects include Qazvin-Rasht, the so-called Gharb (West) project connecting the city of Arak in the central Markazi Province to Khosravi Border Crossing in the western Kermanshah Province bordering Iraq, Mahabad-Urmia and Mianeh-Bostanabad.

Track-laying for the railroad connecting Kermanshah to Iran’s national rail network was completed earlier this month. However, it will take a few months for the project to become fully operational.

Akhoundi also plans to finalize contacts to provide foreign financing for a few major projects, including construction of a high-speed train from Tehran to the central provincial capital of Isfahan and electrification of a railroad from the eastern city of Mashhad to the northern cities of Garmsar and Incheh Borun.

The former project is to be financed by China. Iran has signed a contract with China Railway Group Limited to implement this project. Although the contract was signed in 2015 with an estimated value of €1.8 billion, its scope and value are expected to expand.

Russia will extend €1.2 billion in finance for the Garmsar-Incheh Borun electrification project.

A similar project for the electrification of a 926-km Tehran-Mashhad railroad was recently finalized. China’s Exim Bank signed a contract to provide $1.5 billion in finance for the electrification of the line, which will be conducted by China National Machinery Import and Export Corporation and its Iranian partner MAPNA Group.

   Roads

Akhoundi plans to increase the length of Iran’s freeways to 7,500 kilometers, in line with the target stipulated in the Sixth Five-Year Development Plan (2017-22).

There are 2,500 kilometers of freeways across the country.

The government has invested 30 trillion rials ($800 million) in the past two Iranian years (March 2015-17) for the construction of freeways. Some 2,000 kilometers of freeways in the form of 10 projects are currently under construction.

The 253-kilometer Tabriz-Marand-Bazargan freeway, launched early April, and the 225-kilometer Isfahan-Shiraz freeway are among the main freeway projects underway.

Another important project is a freeway connecting the capital Tehran to Chalous in Mazandaran Province. The mega project worth $2.2 billion consists of four sections spanning 121 km.

Rejuvenating the country’s road fleet is also among Akhoundi’s plans. He says he wants to reduce the age of Iran’s cargo fleet from 17.3 years to 15 years and the age of the bus fleet from 12.7 years to 12.5 years.

  Air

Akhoundi says his ministry will increase the number of active passenger planes from the current 147 aircraft to 228 by 2022.

Most of the new air fleet will come as part of the orders Iranian airlines have placed with the world’s major planemakers after Tehran signed the landmark nuclear deal in 2015, including Iran Air’s orders of 100 jets from Airbus, 80 planes from Boeing and up to 40 turboprop planes from ATR. Iran Air has been delivered seven planes so far, including three from Airbus as well as seven from ATR.

Iran Aseman Airlines has also secured a deal with Boeing to purchase up to 60 jets.

Other Iranian airlines have either signed memoranda of understanding with Boeing and Airbus, or have been in talks with planemakers to renew their fleet.

Among his plans, the minister refers to development of Imam Khomeini International Airport and seven other Iranian airports through domestic and foreign investment.

He promised to breathe life into small airports by increasing the number of short-range planes.

The ministry is looking to transport 36 million passengers in domestic routes by 2022.

  Ports

Akhoundi said the cargo handling capacity of Iranian ports will reach 263 million tons per year.

He noted that his ministry will provide incentives to increase the number of new shipping lines to and from Iran.

International shipping lines, including Mediterranean Shipping Company, Evergreen Line, CMA CGM and Maersk Line, resumed services to Iran after the removal of sanctions as part of the nuclear deal.

Major development projects have been underway in Iranian ports in the past years, including construction projects in the southeastern port of Chabahar, expansion of the southern Shahid Rajaee Port in Hormozgan Province as well as projects in northern ports of Amirabad and Anzali.

  Housing, Urban Development

The minister is planning to carry out a “fundamental review of Iran’s urban design, development and management system” to create “urban discipline”.

His ministry will focus on raising the purchasing power of first-time home-buyers.

Rural residential units will be increased to 900,000.

The ministry will also be committed to conclude the protracted Mehr Housing Project, which was a plan proposed by the former administration.

The controversial Mehr Housing Project was launched by the administration of former president, Mahmoud Ahmadinejad, to provide low-income groups with cheap homes. The project has been in the works for nearly a decade. Although opposed to the project, Rouhani’s administration has vowed to see it through.

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Since the implementation of Iran’s nuclear deal with major world powers in January 2016, Bank Melli Iran has had a turnover of $20 billion, the bank’s official website announced.

According to a report published on Monday, before the implementation of JCPOA when financial sanctions intensified against Iran, international forex activities of BMI were facing significant limits, but the conditions are quite different today, as BMI has delivered more than 145,000 SWIFT inter-bank messages in the post-sanctions era.

Furthermore, BMI has established 32 direct correspondent relations and 150 indirect ones with its global peers. The lender has also been negotiating with 180 foreign counterparts to establish correspondent relations.

The establishment of correspondent relations will help exchange letters of credit with other banks and vice-versa.

In the next step, BMI intends to focus on financing national projects that could become operational.

Bank Melli Iran , the nation’s biggest lender, has received $329 million from the foreign exchange resources of National Development Fund of Iran to support export-oriented projects in the first quarter of the current fiscal year (started March 21), the bank’s official website announced.

According to the report, the amount accounts for one-third of the total allocation of forex resources from the sovereign wealth fund to all lenders.

BMI branches can introduce viable projects for receiving the finance. In line with the measure, a number of plans worth $800 million have been prioritized for assessment while a portion of them has been approved.

An amount equal to 1.5 trillion rials ($40 million) has also been allocated by the fund to BMI to help industries.

In May, Mahmoud Shayan, BMI’s deputy for credit affairs, had said that since the volume of loan applications from the bank is very high and the bank is facing limitations, agreements have been reached with NDFI for the bank to use the foreign exchange and rial resources of the fund as supplementary resources.

In line with these agreements, the state-owned lender was authorized to tap up to $1 billion of the sovereign wealth fund’s resources and give them to applicants in the form of foreign exchange loans.

BMI is the largest commercial bank of Iran with over 3,300 domestic branches and 43,000 employees. The lender has 14 branches overseas and is planning to open branches in the holy cities of Najaf and Karbala.

 

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