The new plan of the Governor General of the Central Bank / De-renting of green notes?

However, this is the first step in this direction, and the continuation of this procedure and the realization of a competitive foreign exchange market requires paying attention to some considerations. Removing restrictions from currency suppliers, creating a competitive market with an auction mechanism instead of the current mechanisms of currency allocation, and creating a derivatives market are among these measures. The realization of this importance depends on the central bank providing a competitive market both at the retail and wholesale levels, and for the foreign exchange market players, including exchanges, exporters, importers, and ordinary people, to operate in this market without mandated pricing.

In a message on Tuesday, the head of Central Bank announced the supply of currency by this bank at the market price. Farzin announced that with the aim of eliminating rent, the central bank has stopped the agreed dollar transactions, and from now on, applicants can receive currency at the market rate without registration. These words of the President can be considered a kind of breaking the policymaker’s habit and turning towards a suitable foreign exchange policy. This action, which is considered to be the recognition of the free market rate of foreign exchange and all the demands in this market, is considered to be the first step in this direction, however, there are considerations regarding this policy that the continuity and success of the new central bank approach depends on paying attention to it is them Before, in the face of currency inflammations, the Central Bank used to reject some requests for currency and try to control the exchange rate, which, while creating rent, ultimately failed after spending the vast resources of the country and made the economic structures of the country defective. . According to Farzin’s statements, it seems that the central bank’s attention is supposed to focus on structures and policies instead of just focusing on price.
The new map of the president

Mohammadreza Farzin, the CEO of Central Bank, announced in a tweet on Tuesday that Central Bank has adopted a new policy with the aim of eliminating the rent formed in the market consisting of foreign exchange and agreed dollars, and from now on, currency applicants can go to exchange offices to get the currency they need at the price get the market These words of the Governor General are presented while the policy adopted by the previous heads of the Central Bank had a different flavor. Based on this, in the past and in the previous currency fluctuations, the policy maker was trying not to recognize the price formed in the informal market in different ways and it was caused by some speculative demands and even unnecessary demands caused by the effort to maintain the asset value and under the capital account. consider

This issue, along with the policy goal of controlling the currency price, made the policy maker try to control the currency price by using the currency resources at his disposal and limiting the applicants to those requests that were real from the point of view of the central bank; An attempt that failed several times; In fact, when the central bank did not recognize the market rate and all the demands for the currency, it had to create another rate for the demands, in its opinion, real. This action fuels the demand for currency by creating incentives to obtain cheap preferred currency and its arbitrage with the market; An example of this issue can be seen in creating a queue to receive a quota of two thousand dollars of currency.

In addition to the fact that despite spending the country’s foreign exchange resources and creating huge rents, these actions did not reach results, usually led to the destruction of the tools and the trust of the market players in the policy maker; In fact, before this, the reactions of the central bank to the inflammation of the currency market were done in such a way that the existing structures were damaged, and finally the central bank was forced to introduce a new mechanism or market for the allocation of currency.

The condition of continuous rotation

Regardless of the words of the head of the central bank, which is considered the first step to move towards the free currency market, the continuation of this process and the realization of a single rate currency requires some considerations and attention to some points that form a specific policy framework for the central bank. First, the central bank should note that the organized market and its limitations should not become an obstacle to the policy announced by the governor. In this way, the central bank should leave aside the traditional divisions of foreign exchange applicants and inject its resources in the foreign exchange market in an integrated and uniform manner by using the auction mechanism.

It should be noted here that leaving the hands of currency suppliers free is an important point, and requiring them to sell their currency to the National Bank exchange does not seem very logical; Granting permission to other banks to buy foreign currency from exporters or even directly selling foreign currency by exporters in the market are other options that free the central bank’s focus and energy from the less important points of the currency market and should be considered; In fact, by creating a transparent platform where currency transactions are carried out at market day prices and increasing supply motivation, limiting the purchase of currency to a specific exchange cannot be justified; In fact, the currency auction mechanism in a competitive market can become a channel for policymakers’ intervention in the market, in addition to providing a platform for direct transactions between currency suppliers and applicants.

In this case, we can hope that a central bank will focus on defining market policies and frameworks instead of focusing on price control and pricing. On the other hand, the newly announced policy may conflict with some markets and existing mechanisms of the currency market; Here, the main goal of the policy of entering the foreign exchange market with a free rate should not be overshadowed, and if it is necessary to remove the previous frameworks, this should be done.

It should be noted that when the exchange rate of the central bank reaches the free market rate, it becomes possible to define derivative instruments by the central bank, and in this way the currency market becomes deeper and the policy maker, in addition to gaining higher credibility in the market, has greater leverage to control expectations. Will have; Instruments that are currently in informal futures trading. Such an action will be a big step in the direction of covering the risk of exporters and importers in providing foreign exchange. Finally, it should be noted that all these measures may lead to the rate reaching the level that is expected in the short term, but it should be noted that the correct framing in the market, moving towards stability and smoothing it, is a valid and more important goal that The current action is consistent.
Competitive market in wholesale and retail

It is necessary for Central Bank to guarantee a competitive market, both at the wholesale and retail levels of green banknotes. At the same time, in order to prevent the creation of multiple rates and the free trading of currency in exchanges, it is necessary for them to sell their currency at the retail level without any mandatory pricing. In other words, at the wholesale level, by competing in the organized market, exchanges buy currency at the highest price they want, and at the retail level, by competing with other exchanges, they sell their currency at the lowest rate they can. This is the framework that must be achieved in the banknote market.

Details of the new method of currency exchange

After the words of the Governor General of Central Bank, Nabizadeh, the currency adviser of the Governor General of Central Bank announced the details of the new decision of Central Bank. Based on this, two main measures have been taken to organize the currency market; First, money changers across the country have been allowed to buy and sell currency in the foreign exchange market. This central bank official added: With the facilitation that has been done, money changers can enter the market, and the central bank will set rates along with the exchanges, and it will not be the case that the central bank will accept any rate that is formed in the market. He continued: Stabilizing the foreign exchange market must be done step by step, and the first step of restoring the stability of the foreign exchange market has been keyed since yesterday, and with the formation of the necessary infrastructure, the central bank will stabilize the foreign exchange market in the next steps.

This responsible official said about the exchange rate of the foreign exchange market: This rate did not match not only with the informal market of the country but also with the economic realities. On the other hand, the existence of a gap between the agreed rate and the informal market had led to the formation of rent and the access of people who really needed currency was limited. He clarified that the central bank in its new decision, while destroying the agreed market, will set a rate that will destroy the rent. He continued: Of course, Central Bank’s policy is not to accept this rate as the official currency rate of the country, and from now on, Central Bank will have a strong presence in this market. The central bank will definitely not allow the formation of these rates, which are not correct from the point of view of economic foundations, by entering with more power in the foreign exchange market.

At the end of his speech, Nabizadeh announced that people will be sellers from now on, and they can sell their currency to the exchanges at the market rate in an official manner and in compliance with the Central Bank’s rules; Therefore, from now on, there is no need to register on the site and stand in line to receive currency, and people can easily buy and sell currency by visiting the exchanges.

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