Hemmati: Forex rate cannot be fixed amid 30% inflation
Iran’s Economy Minister Abdolnaser Hemmati said fixing the forex rate can lead to corruption while maintaining a stable exchange rate under a 30% inflation is impossible.
Speaking during a session of the Parliament’s Economic Committee on Monday, Hemmati also said it is estimated that people hold about $20 billion to $40 billion in cash, explaining that this accumulation of cash is aimed at preserving their assets against inflation.
He pointed out that the rise in the dollar price has not addressed the nation’s non-oil trade deficit, which reached $17 billion in the previous year, marking an unprecedented level. Hemmati indicated that while the nominal exchange rate [NIMA system] remained stable in the last Iranian year, the country experienced inflation rates of 42% to 52%.
He argued that having four different exchange rates is untenable, advocating for a regulated floating exchange rate in accordance with parliamentary law, where the Central Bank of Iran can manage rates within a 3% fluctuation.
He highlighted that the official exchange rate was approximately 40,000 tomans per dollar last year, while the free-market rate reached as high as 68,000 tomans in the first month of Iranian calendar (March 20-April 19) before retracting.
Hemmati pointed out that the 40% disparity between market and nominal rates leads to substantial economic rents, and supported the Central Bank of Iran’s recent establishment of a negotiated currency market, warning that if the exchange rate remains fixed, the country would face reduced exports, increased import demand, and further corruption.
While stressing the need for increased efforts to reduce inflation, Hemmati defended the government’s performance, stating that the CBI is striving to stabilize the real exchange rate to align it closer to market rates and expressed hope that this would soon occur.