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Iran's Central bank governor defends foreign exchange policy

Tehran, Feb 3, IRNA -- Governor of Central Bank of Iran (CBI) Mohsen Nourbakhsh defended the bank's policy of selling dlrs 14 billion of hard currency in Dubai currency markets.

The Persian daily Iran quoted him in its Monday edition as saying that contrary to what has been said Iran's hard currency exchange balance is stable.

"I should say that since my tenure as the governor of Central Bank, all economic indices have been released regularly each quarter showing the latest monetary and hard currency situation of the country," Nourbakhsh said.

He also rejected the views that the parity rate of exchange of rls 8,000 per dollar is too high, adding, "If the rate were to drop, some would complain that the rate is too low."

Recently, the previous Labor and Social Affairs Minister and candidate for president in the sixth and seventh presidential elections Ahmad Tavakoli, in an open letter to President Khatami, had slammed as 'crime' the selling of hard currency in the Dubai and other countries' currency markets 'ostensibly to cover the budget deficit'.

"Although the policy has been in shrouded in secrecy denying the experts and public to be properly informed, reliable sources have said that over dlrs 12 to dlrs 14 billion have been wasted in this manner, seven billion dollars of it in the currant Iranian Year," Tavakoli said.

The daily Iran quoted Nourbakhsh as countering that 'there is no mention of dlrs 14 billion in the balance of payments account and the source of the figure has to be verified'.

Meanwhile, Nourbakhsh said here last week that the government has asked for an increase in the hard currency ceiling for the next Iranian year to pay off its foreign debts and continue implementing its single parity forex rate mechanism.

Under the bill, the forex ceiling for next Iranian calendar year of 1382 (to start March 21, 2003), would increase to dlrs 15.3 billion from dlrs 11.5 billion and government would also be allowed to withdraw dlrs 2.5 billion from the Forex Reserve Fund to pay off debts and prevent any rise in government's debts to the Central Bank of Iran due to enforcement of the single parity rate system.

Nourbakhsh said that the government's monetary and forex policies next year would be based on sustained forex parity rate policy, using Forex Reserve Fund's resources to grant facilities to the private sector and increase investment.

Fearing a budget deficit next year, government has put forward the bill for amendment to Article 60 of the Third Five-Year Economic Development Plan's (2000-2005) law, which bars any withdrawal from the Fund unless there are ample good reasons, namely using the fund for compensation of deficit in budget caused by slump non-oil export revenues and falling oil revenues.

It is believed that oil revenue targeted for next Iranian calendar year would hardly be met due to likely market fluctuations, triggered by international developments. They even cast doubt on tax earnings.

The Surplus Forex Reserve Fund was formed in April 2000 to prevent likely fluctuations in oil revenue and prevent adverse impact of the phenomenon on annual budgets.

The government had been permitted twice already to withdraw from the said Fund. The first permission, which was given six months after the formation of the Fund, authorized the government to withdraw dlrs 1.25 billion for payment of bonus to the retired, fight drought and accomplish semi-implemented projects.

For the second time in the year 2002, government was allowed to withdraw dlrs 2.1 billion for making up deficit in general budget and dlrs 2.5 billion more for payment of overdue debts.

... Payvand News - 2/4/03 ... --

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