Chapter

ISLAMIC REPUBLIC OF IRAN

Author(s):
International Monetary Fund. Monetary and Capital Markets Department
Published Date:
September 2000
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Status Under IMF Articles of Agreement
Article XIVYes.
Exchange Arrangement
CurrencyThe currency of the Islamic Republic of Iran is the Iranian rial.
Exchange rate structure
DualUntil March 19, 2000, the exchange rate system consisted of three officially approved rates: (1) the official “floating” rate of Rls 1,750 per $1 applied mainly to the imports of essential goods and services of public and publicly guaranteed debt; (2) the official “export” rate of Rls 3,000 per $1 applied to all other transactions; (3) and an effective Tehran Stock Exchange (TSE) rate applied to imports from a positive list of 30 categories of goods (mostly essential industrial raw materials). As of March 20, 2000, the official “export” rate was abolished, and since then the effective TSE rate is applied to all transactions except for the imports of essential goods and for services of public and publicly guaranteed debt.
Classification
Conventional pegged arrangementThe exchange rates are set by the Bank Markazi (BM).
Exchange taxNo.
Exchange subsidyGovernment oil export proceeds, surrendered to the BM at Rls 1,750 per $1, are mostly earmarked for government imports and external debt service, which gives rise to an implicit exchange subsidy.
Forward exchange marketNo.
Arrangements for Payments and Receipts
Prescription of currency requirementsNo.
Payment arrangements
Bilateral payment arrangementsAll bilateral payment arrangements have been terminated, and the outstanding credit balances are in the process of being settled.
Regional arrangementsIran is a member of the ACU. Settlements of current transactions with the member countries of the ACU are required to be settled in AMUs.
Clearing agreementsYes.
Administration of controlForeign exchange operations are centralized at the BM. The list of allowed imports and exports is regulated and issued periodically by the Ministry of Commerce.
International security restrictionsn.a.
Payment arrearsNo.
Controls on trade in gold (coins and/or bullion)
Controls on external tradeAuthority to trade in gold for monetary purposes is reserved for the BM. Exports of gold ingots, coins, or semifinished products are prohibited. Exports of finished articles may be effected in accordance with relevant regulations. Natural and juridical persons, including authorized banks, may import gold, platinum, and silver bullion for commercial purposes, in accordance with the relevant regulations. Travelers may bring in jewelry up to a value equivalent to Rls 5 million and may take out the entire value, provided that it is recorded on their passport. The importation of personal jewelry with a value exceeding this amount requires approval from the BM. The exportation of Iranian gold coins for numismatic purposes requires prior approval from the BM.
Controls on exports and imports of banknotes
On exports
Foreign currencyNationals leaving Iran are allowed to purchase up to $1,000 a person a year at the TSE rate. For traveling to neighboring countries and Southeast Asia, the allowance is $300 and $500, respectively. Foreign exchange from foreign currency—denominated (FCD) accounts originating abroad and/or credit cards may be transferred by natural persons without any limitation.
On imports
Domestic currencyYes.
Foreign currencyThere is no limit on the amount of foreign exchange that foreign travelers may bring into the country, but a declaration is required to be able to repatriate the excess amount not used in the Islamic Republic of Iran.
Resident Accounts
Foreign exchange accounts permittedYes.
Held domesticallyIranian nationals may open FCD accounts both domestically and abroad, and foreign nationals may maintain accounts in both foreign currency that originated abroad and local currency.
Held abroadYes.
Accounts in domestic currency convertible into foreign currencyThe balance of accounts is not convertible.
Nonresident Accounts
Foreign exchange accounts permittedForeign exchange originating abroad and deposited in these accounts may be transferred abroad without limitations.
Domestic currency accountsThe balance of rial accounts maybe used only in the Islamic Republic of Iran.
Blocked accountsn.a.
Imports and Import Payments
Foreign exchange budgetNo.
Financing requirements for imports
Minimum financing requirementsYes.
Advance payment requirementsRequirements range from 15% to 100%, depending on the type of imports. Import deposits are unremunerated but refundable.
Advance import depositsYes.
Documentation requirements for release of foreign exchange for importsThere is a positive import list for 37 broad categories of goods for imports at the effective TSE rate.
Domiciliation requirementsYes.
Preshipment inspectionYes.
Letters of creditImports through LCs and bills of exchange are permitted.
Import licenses used as exchange licensesYes.
Import licenses and other nontariff measuresAll importers must obtain import licenses from relevant ministries together with the approval of the central bank for foreign exchange allocation at a particular exchange rate or the opening of LCs with the respective commercial banks. Clearance through customs is authorized upon presentation of shipping documents endorsed by an authorized bank and of a permit issued by the Ministry of Commerce. Certain goods, such as Pharmaceuticals, must be accompanied by a special permit issued by the Ministry of Health, Treatment, and Medical Education, and telecommunication devices require a permit issued by the Ministry of the Post, Telegraph, and Telephone.
Positive listImport regulations distinguish between authorized, conditional, and prohibited goods. Authorized goods cover a broad category of items, which is announced periodically by the Ministry of Commerce.
Negative listConditional goods may be imported under certain conditions. Imports from Israel are prohibited.
Open general licensesAt the beginning of each year, the Ministry of Commerce issues the list of goods that may be imported without prior approval.
Licenses with quotasYes.
Import taxes and/or tariffsMost imports are subject to an ad valorem commercial benefit tax in addition to any applicable customs duties.
State import monopolyNo.
Exports and Export Proceeds
Repatriation requirementsUntil March 19, 2000, all non-oil export proceeds were fully repatriated and surrendered to commercial banks (except for a “bonus” exemption) against a fixed rate of Rls 3,000 per $1. The banks then surrendered the funds to the central bank after a maximum of 15 days. Upon surrendering, exporters were given the right, in the form of “import certificates,” to repurchase the full amount of foreign exchange from the central bank and could either use this right themselves for importing or sell the right on the TSE to other authorized importers. The period between the date goods were exported and the date foreign exchange earnings were repatriated to the banking sector was extended to eight months from six months. An exporter could receive a 1% bonus in the form of a retention allowance for each month of early repatriation and surrender. Effective March 20, 2000, exporters receive certificates of deposit (CDs) against the repatriation of their foreign exchange earnings, which they may use for their imports, sell on the TSE to other licensed importers, or sell to the bank at the preceeding day’s TSE rate. Also from this date, exporters who export their goods and services with LCs may receive a 1.5% bonus in the form of a retention allowance for each month of early repatriation and surrender.
Surrender requirementsThe ratios are the same as those for the repatriation requirement.
Financing requirementsYes.
Documentation requirements
Letters of creditThe export of goods and services through LCs and/or trustee transactions and bills of exchange is permitted.
GuaranteesShorter-term trade financing is currently undertaken through bank-to-bank credit lines, where exporters are certain of receiving their sales proceeds on a sight basis through a postimportat ion financing facility already established between the BM and the respective foreign banks. Under this umbrella facility, the BM provides an implicit foreign exchange guarantee against rial/dollar devaluation (but not against fluctuations in cross rates, which would have to be met by the importers).
Preshipment inspectionInspection by the customs authorities generally applies to all exports.
Export licensesThe Ministry of Commerce issues an overall export license for goods on the authorized list.
Without quotasYes.
With quotasYes.
Export taxesNo.
Payments for Invisible Transactions and Current Transfers
Controls on these transfers
Trade-related paymentsFreight charges may only be transferred through LCs or bills of exchange up to a maximum of 30% of the f.o.b. value of goods; to transfer more than 30% requires the approval of the BM. Only Iranian insurance companies may issue insurance policies for the import of goods. Approval is on a case-by-case basis for unloading and storage costs, and payment of administrative charges. There is no control on the payment of commissions.
Prior approvalYes.
Investment-related payments
Prior approvalApproval is on a case-by-case basis for profits and dividends.
Indicative limits/bona fide testThere are indicative limits and bona fide tests for the payment of amortization of loans or depreciation of direct investments.
Payments for travel
Quantitative limitsThe limits are $1,000 a year for a person with an individual passport and $500 a person for those traveling with a group passport. In the case of travel to neighboring countries, the limits are $500 a year a person in the case of individual passports, and $150 a year a person in the case of group passports.
Indicative limits/bona fide testYes.
Personal paymentsIranian nationals are allowed to pay pensions and family maintenance to nonresidents by obtaining foreign exchange from exchange bureaus and are allowed to transfer pensions and family maintenance through the banking system.
Prior approvalYes.
Quantitative limitsBudget allowances are provided on a monthly basis to students on scholarships abroad, approved by the Ministry of Higher Education, and may be converted into foreign exchange at the “floating” rate of Rls 1,750 per $1. All other students abroad are allowed to purchase foreign exchange for tuition and boarding at the TSE rate (with limits), and beyond that from externally sourced FCD accounts. For other invisible payments, additional amounts beyond BM limits may also be legally paid for from externally sourced FCD accounts. Individuals who seek medical treatment abroad may obtain a foreign exchange allowance, if it is approved by the High Medical Council of the Ministry of Health, at Rls 1,750 per $1.
Indicative limits/bona fide testYes.
Foreign workers’ wages
Prior approvalYes.
Quantitative limitsForeign nationals working in the public sector in the Islamic Republic of Iran whose services are considered essential are allowed to remit abroad up to 50% of their net salaries per month at the TSE rate with prior approval of the central bank, up to a monthly limit of $500. Foreign workers in the private sector do not qualify for outward remittances.
Indicative limits/bona fide testYes.
Other paymentsPayment of consulting/legal fees with the confirmation of the Bureau of Legal Services of Iran is permitted.
Prior approvalYes.
Quantitative limitsThere are quantitative limits for payment of subscriptions and membership fees.
Proceeds from Invisible Transactions and Current Transfers
Repatriation requirementsYes.
Surrender requirementsYes.
Restrictions on use of fundsYes.
Capital Transactions
Controls on capital and money market instruments
On capital market securities
Shares or other securities of a participating nature
Purchase locally by nonresidentsNonresidents may invest in instruments traded on the TSE, but such investments are not protected under the investment law.
Controls on derivatives and other instrumentsn.a.
Controls on credit operationsThere are controls on all credit operations and all transactions in sureties, guarantees, and financial backup facilities.
Controls on direct investment
Outward direct investmentPermitted with the confirmation of the High Council for Investment.
Inward direct investmentControls are administered by the Organization for Investment and Economic and Technical Assistance of the Ministry of Economic Affairs and Finance, if the investment took place in accordance with the Law Concerning Attraction and Protection of Foreign Capital Investment.
Controls on liquidation of direct investmentThe repatriation of capital is guaranteed with the approval of the Organization for Investment and Economic and Technical Assistance of the Ministry of Economic Affairs and Finance and the BM.
Controls on real estate transactionsn.a.
Controls on personal capital movements
Loans
By residents to nonresidentsYes.
To residents from nonresidentsYes.
Gifts, endowments, inheritances, and legacies
By residents to nonresidentsYes.
Settlement of debts abroad by immigrantsYes.
Transfer of assets
Transfer abroad by emigrantsYes.
Provisions specific to commercial banks and other credit institutions
Borrowing abroadYes.
Maintenance of accounts abroadYes.
Differential treatment of deposit accounts in foreign exchange
Interest rate controlsYes.
Credit controlsYes.
Differential treatment of deposit accounts held by nonresidents
Interest rate controlsYes.
Credit controlsYes.
Investment regulationsYes.
Open foreign exchange position limitsYes.
Provisions specific to institutional investorsn.a.
Other controls imposed by securities lawsn.a.
Changes During 1999
No significant changes occurred in the exchange and trade system.
Changes During 2000
Exchange arrangementMarch 20. The official “export” exchange rate was abolished, reducing the number of exchange rates to two from three.
Exports and export proceedsMarch 20. Exporters receive a CD that they may use for imports, sell on the TSE, or sell to their bank.

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