Radiofarda – As Iran suffers from a sharp decline in exports, the minister of economy and finance has said less than half of the hard currencies earned from exports return to the country.
Since the United States imposed crippling sanctions on Iran’s economy last year, bringing oil exports to a halt, the country began to feel a huge foreign currency crunch, which sharply devalued its currency. Therefore, repatriating non-oil export revenues in hard currency can be a lifeline for the country.
Farhad Dezhpasand the minister of economy now laments that only $27 billion of a total of $61 billion from non-oil exports returned to the country in the last 18 months. He was speaking at a gathering of government officials and private businesses in Tehran on Monday, October 7.
As U.S. sanctions came into play in mid-2018, Iran instituted a system whereby payments of foreign customers to Iranian exporters had to go through a special system called Integrated System for Hard Currency Transactions, better known with its Persian acronym NIMA./**/ /**/ /**/ SEE ALSO:Iran’s Top Exporter Says Impossible To Do Business
Under U.S. sanctions, foreign buyers of Iranian goods cannot use the established international banking channels to make payments to banks in Iran. So exporters have two choices; having accounts outside the country to receive payments or use NIMA.
The Central Bank of Iran established NIMA in 2018, forcing exporters to wire their hard currency earnings through a special network, not much different from the Havala (Hawala) system. It is basically a non-banking system of transferring largely untraceable money through corresponding money-handling outfits.
Once the government collects the proceeds from exports, it makes the hard currency available to importers at a lower rate than the open market to import foreign goods. But exporters have complained that foreign companies do not want to deal with such a system, and they have been losing business.
One interesting issue is that many large companies in Iran are directly or indirectly owned or controlled by state entities, including the Islamic Revolution Guards Corps (IRGC). What happens to their export revenues? Do they repatriate the hard currency fully, or retain some of it in foreign countries, such as Iraq, which is a big importer of Iranian goods. If so, where is the hard currency being used or for what purposes?
Iran’s customs department has not released any export data since March this year, but the figure mentioned by the minister, also gives a clue as to how much non-oil exports Iran has had during the sanctions./**/ /**/ /**/ SEE ALSO:As U.S. Sanctions Bite, Iran Fulfills Only 63% Of Non-Oil Export Target
Figures published during the last Iranian calendar year (March 2018-March 2019) show Iran exported around $44 billion dollars of goods in that 12-month period. Subtracting this amount from the $61 billion total the minister has mentioned for the 18-month period, it becomes clear Iran exported $16.7 billion of non-oil goods in the past six months since March 2019.
Last year’s figures show that in March-September 2018 Iran exported $23 billion. It means in 2019 Iran’s non-oil exports have dropped by 30 percent.
If Iran exported just $16.7 billion since March and more than half of the hard currency stayed abroad, it means Iran earned a relatively meager sum of around $7 billion from non-oil exports.
Dezhpasand has also said that annual tax evasion in Iran is around $10 billion.
Lack of oil exports, dwindling foreign currency earnings from exports and tax evasion put a tremendous burden on government finances. Since last December the Central Bank of Iran (CBI) has refrained from disclosing any information on the performance of the country’s budget.
But if the previous Iranian year is any indication, published figures show tax revenues between March 2018-Mrch 2019 came short $7.5 billion, which comes close to the $10 billion Dezhpasand has mentioned as a current estimate.
Iran has resorted using its foreign currency reserves in 2019, but it is not clear how much the reserve fund will last. The country also faces a problem of transferring hard currency from any foreign accounts, with strict U.S. sanctions making this a very difficult proposition.