Iran says it will cut imports of nonessential goods

October 14, 2012

Iran said it would seek to cut imports of nonessential goods and urged its citizens to reduce their use of foreign-made cellphones and cars, as the country struggles to cope with Western economic sanctions.

The policies suggest the government is moving the economy to an austerity footing to withstand the sanctions, which have been imposed because of Iran’s controversial nuclear program and have slashed its income from oil exports this year.

Authorities have divided imports into 10 categories based on how essential they are and will provide importers with dollars at a subsidized rate to buy basic goods, Hamid Safdel, deputy industry minister, was quoted as saying Sunday.

Meanwhile, importers of goods in two nonessential categories will have to obtain dollars at much more expensive rates on the open market, the Iranian Students’ News Agency (ISNA) quoted him as saying.

Goods in these two categories include cigarette papers, wallpaper, cellphones, luggage, clothing and cars, ISNA reported. It said $10 billion to $12 billion was spent annually on importing luxury and nonessential goods into Iran.

Industry Minister Mehdi Ghazanfari on Saturday urged Iranians to limit their use of such goods and turn to domestic manufacturers to help the government contend with sanctions.

As the value of its rial currency has plunged in the face of the sanctions, Iran has moved gradually to favoring essential imports while discouraging luxuries. The latest announcements showed it was stepping up that approach.

A new foreign exchange center established last month supplies petrodollars to designated importers at cheap rates of roughly 25,000 rials per dollar.

At the same time, the rial was trading in the open market at about 34,000 on Sunday, Tehran money-changers said — less than half its value a year ago and down by about a quarter since late last month.

Currency trading volumes in the open market are very low since the central bank cut back its supplies of dollars to the market. The arrest of traders on charges of manipulating the rial in recent weeks also has made money-changers cautious.

With a gross domestic product of about $6,400 per person, according to the International Monetary Fund, Iran is not a wealthy country overall.

But its population of about 75 million includes a sizeable urban middle class that has been an avid consumer of foreign-made goods, including Samsung and Sony electronics and Peugeot cars.

Safdel said Sunday that there were no plans to raise import tariffs on luxury items. Authorities apparently think the rial’s weakness will be enough to slash purchases of those goods.

Iran’s merchandise imports are running at slightly over $50 billion a year, according to the government, so if it succeeds in slashing them by an amount close to $10 billion to $12 billion, that could reduce pressure on the country to run down its foreign exchange reserves.

The reserves stood at $106 billion at the end of last year, according to the IMF, but some analysts estimate they may have dropped by several tens of billions of dollars as the sanctions cut oil income. The government keeps their level secret.

Tehran’s effort to use the exchange rate to reduce luxury imports risks a surge in corruption and black-market dealing.

Mohammad Bayatian, a member of parliament’s industry committee, said last week that the committee would investigate claims that 750 luxury cars were imported illegally using cheap dollars purchased at a special government rate of 12,260 rials, parliamentary news agency ICANA said. That rate is supposed to be used for only the most vital goods, such as food and medicine.

— Reuters

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