4200 Tomans per dollar; from creating rent to importing dog and cat food

Iran’s Attorney General said that “the enemy is seeking to enter into a full-scale economic war” with the Islamic Republic. According to him, dog and cat food has been imported into the country for 4,200 tomans. Rouhani had previously said that he did not agree with the 4,200 tomans.

On Thursday, January 31, Iranian Attorney General Mohammad Jafar Montazeri announced the intention of what he called the "enemy" to enter into a "full-scale economic war" with the Islamic Republic.

The Iranian Attorney General, speaking at a meeting with economic activists in the Chabahar Free Zone, also emphasized: "The judicial system and 350 prosecutors, alongside the government, stand with complete unity in the economic war against the enemy and are working and supervising in the fields of market regulation, price monitoring, and the entry and exit of goods."

According to IRNA, Montazeri also pointed out that "no institution has the right to close production units due to bank debt," and called on officials, especially governors and governors, to "resolve the problems" in various meetings with banks and economic activists.

The Iranian Attorney General also said: "All goods that were imported into Chabahar before January 17 of this year must have their customs problems resolved immediately, and officials should not cause harm to the people."

A circular every 16 hours

Abdul Rahim Kurdi, CEO of the Chabahar Free Zone, also announced at the meeting that "some laws, regulations, and numerous directives have hindered development and increased production."

He added: "Unfortunately, changes in management and the issuance of circulars, notes, and cumbersome laws and regulations have prevented free zones from achieving their set goals. In the past year, only 320 circulars have been issued by customs for free zones, which means that one circular has been issued every 16 hours during the year."

The CEO of the Chabahar Free Zone continued to say that "the problems that have arisen for manufacturers have caused many of them to close and rice factories to become unemployed."

At this meeting, a number of economic activists also criticized, among other things, "customs' strictness in clearing goods and cumbersome laws and regulations."

Iranian economic activists have long warned of the “disruption” of the country’s economy. On January 15, Masoud Khansari, head of the Tehran Chamber of Commerce, attributed the disruption to “domestic problems” rather than US sanctions against Iran, and reported numerous complaints from economic activists about “obstacles to production and business.”

Khansari also warned, referring to correspondence between the Tehran Chamber of Commerce and the Iranian Minister of Industry, that the problems of “many industries and manufacturers” have led to a “boom” in layoffs and the risk of production units closing. At the same time, Asadollah Asgarovaladi, one of Iran’s most prominent economic activists, also referred to “serious challenges” facing exporters and said that “after 64 years of export activity,” he had stopped his activities in this field two months ago.

Arash Mohebinejad, secretary of the Iranian Homogeneous Industries and Parts Manufacturing Association, had previously said to these two economic activists, noting that "400 parts manufacturing units are currently closed or semi-closed." He added: "Since the beginning of this year, 280,000 parts manufacturing workers have been unemployed, of which 130,000 have been laid off, meaning they have either been fired or a new contract has not been signed with them after their contracts expired; 150,000 are also in a state of suspension."

One of the problems of Iranian exporters and importers of raw materials to the country is the 4,200-toman state currency and the problems arising from the steps of registering an order in the “NIMA system.” Economic activists emphasize the necessity of “implementing imports without transferring foreign exchange.” Khansari had said: “Production units have many problems in supplying their raw materials and intermediates, so if the order registration and its long steps are to be completed in the NIMA system, it will create many problems, and therefore it is suggested that imports be carried out without transferring foreign exchange for raw materials.”

Exporters are also in trouble in another way. Asgarovaladi said: "Foreign buyers are asking exporters to introduce a bank to them to deposit the proceeds from the purchase of Iranian goods so that it can be approved, while the Nima system is not a bank and is only the Central Bank's exchange organization, which has created serious problems for exporters and many of them are forced to close their businesses."

Currently, there are three dollar rates in the Iranian foreign exchange market: the government rate of 4,200 tomans for basic goods and medicine, the fluctuating dollar rate in the secondary market, or the rate set in the "NIMA system," and finally the dollar rate in the free market, which reached more than 12,000 tomans two days ago.

NIMA (Integrated Foreign Exchange Transactions System) determines the exchange rate in the secondary market, and SENA (Exchange Supervision System), where foreign exchange transactions of authorized exchanges are recorded, determines the third exchange rate in Iran's free market.

Importing "dog and cat food" with government currency

The government's setting of a rate of 4,200 tomans to the dollar has been met with much criticism from the very beginning. The Attorney General of Iran also referred to the same issue in another part of his speech today, saying: "Some people have imported goods such as dog and cat food with 4,200 tomans, which are not needed at all, and this is an injustice to the country."

Iranian President Hassan Rouhani, while explaining the process of “single-rate” currency prices, said on January 15 that he was against the 4,200-toman dollar rate, but agreed to it because of the opinion of “all economists.” He said, “It was a good plan, but what did some brokers do?” He added, “Some people placed orders and got money from the central bank, coordinated with a team of foreign brokers, got $100 million, imported $50 million in goods, and put the rest on the market.”

Rouhani then added, referring to the fact that “the government was forced to change the plan,” “We are now paying 4,200 tomans for basic goods. Not a week goes by that I don’t speak, shout, and shout in the government. Our minister and deputy minister are not even an opponent.”

Although the Iranian president had said that “there are betrayals that cannot even be expressed,” he had also emphasized that “no one can say that we stand against the enemy and do not give martyrs and wounded.” Rouhani had said that the country’s conditions were “not normal and natural” and that the United States had launched an “economic war” against Iran with the help of Israel and “reactionary countries in the region.”

Despite the emphasis of many experts and economic activists on "mismanagement" and "domestic problems," Rouhani yesterday once again pointed out that "we are facing the greatest economic pressure since the revolution," and said: "Today, our problems are mainly due to the pressure of America and its agents. Instead of condemning America, no one should blame the government that serves or the great Islamic system."

Mohammad Jafar Montazeri, the Attorney General of Iran, also repeated a similar theme to Rouhani's words in his speech today, saying: "The enemy has tried various ways to strike at the Islamic system, but has failed due to the vigilance of the nation and the government, and is now seeking to enter a full-scale economic war, and we must all help each other so that the enemy becomes more desperate than before."

"Behind the Scenes" of the 4200 Toman Dollar

The decision to set the government rate of 4,200 tomans to the dollar, which became known as the "Jahangiri dollar" due to its announcement by the First Vice President of Iran, was made in late April of this year (2018) following severe currency fluctuations in the country.

Many critics of the government's determination of the exchange rate, such as Mohsen Jalalpour, former head of the Iranian Chamber of Commerce, while emphasizing that "the 4,200-toman dollar does not reach the people and only creates rent for a few," call for the liberalization of the economy and the natural determination of the exchange rate by this market-based economy.

According to the newspaper “Deniya Eqtesad” on December 12, Hassan Rouhani, Eshaq Jahangiri, Mohammad Bagher Nobakht, Mahmoud Vaezi, Valiollah Seif, Bijan Zanganeh, Masoud Karbasian, Abdolreza Rahmani Fazli, Hesameddin Ashna, Mojtaba Khosrowtaj, Majid Takht-Ravanchi, Morteza Bank, Mohammad Nahavandian, Mahmoud Hojjati, Masoud Nili, Mohammad Shariatmadari, Ahmad Araghchi, and Reza Weise were participants in the “urgent meeting” of the government’s economic headquarters on the evening of April 10. The most important decision of this meeting was to set the rate of 4,200 tomans per dollar for all foreign exchange transactions and to declare any rate other than that for smuggling.

Hesameddin Ashena, an advisor to the Iranian president at the time, claimed that Hassan Rouhani was the only one who opposed the plan. In response to this claim, however, Masoud Nili, a former special assistant to Rouhani, called for the release of the audio file of that meeting, and referring to the “inaccuracy” of most of the material that had been quoted from the meeting up to that point, said: “How good it would have been if the audio file of this meeting had been made public, given the importance of the comments and the fact that it is unlikely to contain anything confidential. This would have allowed for incorrect perceptions to be corrected.”

According to Donya Eqtesad, Nili’s proposal could have helped “illuminate the background” of this decision; an important decision with “heavy consequences” whose “effects” on the foreign exchange market, the commercial sphere and the macroeconomics cannot be “forgotten anytime soon.” However, Masoud Nili, who was considered one of the most influential figures supporting a free economy in the Rouhani government, stepped down from his position and the Iranian president accepted his resignation on November 12.

Source: DW