CHAPTER NINE:

Monetary and Foreign Exchange Policies

ARTICLE 83- Composition of members of the Money and Credit Council will be modified as follows:

A- Minister of Economic Affairs and Finance.

B- Governor of the Central Bank of the Islamic Republic of Iran.

C- Head of the Plan and Budget Organization or his Deputy for

Economic Affairs.

D- Two ministers selected by the Cabinet

E- Minister of Commerce.

F- Two monetary and banking experts, nominated by the Governor

of the Central Bank of the Islamic Republic of Iran, and

confirmed by the President.

G- Attorney General or his deputy.

H- President of the Chamber of Commerce, Industries and Mines

1- Head of the Chamber of Cooperative.

J- One representative from each of the parliamentary “Plan and Budget”,“Economic Affairs and Finance and Cooperative” Commissions selected by the embly, to act as observers.

Note 1: The executive by-law of this Article, including procedures for holding meetings of the Council and decision making processes shall be proposed by the Governor of the Central Bank of the Islamic Republic of Iran, and will be enforced upon approval of the Money and Credit Council.

Note 2: The council will be chaired by the Minister of Economic Affairs and Finance, and by the Governor of the Central Bank of Islamic Republic of Iran in the Minister’s absence.

ARTICLE 84-

A- Increase in the balance of “scheduled facilities” will be reduced by ten (10) percent per year during the term of the Third Plan, as compared to the figures approved for 1378 (1999-00)

B- Government supports in allocating credits facilities to various sectors and activities will be done in the form of subsidized loans, priority credit allocations, and acceptance of repayment guarantee in the framework of the annual budget.

ARTICLE 85-

A- To regulate foreign exchange obligations of the country, the Central Bank of the Islamic Republic of Iran, ministries, agencies and state-owned enterprises content of Article (11) of this Law are required to observe the following terms:

1- To perform their foreign exchange operations and transactions through foreign exchange accounts with domestic or foreign banks with prior approval of the Central Bank of the Islamic Republic of Iran. Iranian agent banks are obliged to render services to the above mentioned agencies, according to the international standards.

2- To declare to the Central Bank of the Islamic Republic of Iran within three months after the approval of this Law all of their foreign exchange accounts abroad. Continuation of these accounts will henceforth required prior confirmation of the Central Bank.

B- Government is authorized to receive or guarantee foreign finance in the framework of the budget bills, taking the following terms into consideration:

1- The timing of repayment of short-and medium-term foreign loans and obligations shall be made in a way that the annual repayment of such loans and obligations - excluding buy-back obligations- do not exceed thirty percent (30%) of the foreign exchange revenues upon termination of the Third Plan period. Priority shall be given to long term foreign finance.

2- Government is required to schedule the stock of foreign debts and obligations in a way that the current value of the country’s debts and obligations (the differentials of the present value of the country’s debts, obligations and foreign exchange reserves of the Central Bank of the Islamic Republic of Iran) shall not exceed twenty five billion ($ 25,000,000,000) dollars in the last year of the Plan.

C- To execute public projects utilizing foreign finance, the executive agencies are required to observe the following conditions:

1- All projects under the responsibility of the concerned minister and/or the highest ranking executive official of the agency, must be confirmed by the Economic Council, and be technically, economically and financially justifiable. The aggregate expenditures for execution of these projects shall not exceed the determined ceiling. Receiving and repayment scheduling of the facilities for each project, the extent of utilization of the locally manufactured components- taking into account the local capacities, resources and capabilities- and in due consideration of the Law of “Maximization of use of Country’s Technical, Engineering, Production, Industrial and Executive Capabilities and Facilitating the Export of Technical and Engineering Services” enacted on March 3, 1996 (12/12/1375), and also the criteria for observation of the environmental factors in execution of each project should be approved by the “ Economic Council ”.

2- To present technical and economic feasibility study to the Plan and Budget Organization prior to contracting.

3- Any foreign transaction or contract with a value of one million dollars ($1,000,000) and more shall be made through limited or international tender (by advertising notice of the tender in domestic and foreign widely circulated newspapers).

In all tenders the right to control, qualitative and quantitative inspection, and process control for all imported goods and projects are reserved for the buyer. The minister or the highest ranking official of the concerned entity is responsible for the good performance of the above subject.

D- Government is required to present tables related to the foreign exchange receipts and payments for the remaining year of the Plan simultaneous with the presentation of the annual budget bills.

E- Government is required to present buy-back projects and projects of the entities content of Article (11) of this Law, and non-governmental public institutions and banks simultaneous with the presentation of the annual budget bills, and execute these projects upon enactment by the Islamic Consultative Assembly.

F- The executive by-law of this Article shall be proposed jointly by the Plan and Budget Organization, Ministry of Economic Affairs and Finance , and the Central Bank of the Islamic Republic of Iran, and to be approved by the Cabinet.

ARTICLE 86- To regulate and create equilibrium in the foreign exchange market and to promote domestically produced goods and services, a committee shall be established, chaired by the President, and membership of the Ministers of Economic and Financial Affairs, Commerce, Foreign Affairs, the Governor of the Central Bank of the Islamic Republic of Iran, the Head of the Plan and Budget Organization, and two other ministers selected by the Cabinet.

Note 1- Three members of the Islamic Consultative Assembly from the “Commerce”, “Economic and Financial Affairs, and Cooperative” Commissions, selected by the Assembly will attend the above-mentioned committee as observers.

The Secretariat of the Committee is required to prepare and present quarterly performance reports to the above-mentioned parliamentary Commissions.

The Secretariat of the Committee shall be located in the Central Bank of the Islamic Republic of Iran.

Note 2: Ministry of Commerce is the responsible authority for regulating the balance of payment of the country. All ministries are required to cooperate with Ministry of Commerce in preparation of operational plan and division of the quantitative and qualitative targets, regulating and prioritizing the country’s balance of payment.

Note: The government foreign exchange policy must be formulated in a manner as to safeguard the value of the national currency.

ARTICLE 87- To support domestic products, government is authorized to procure, if possible, part of the essential but imported goods at official rate from domestic producers, and sell the economized foreign exchange at import certificate rate (variz-nameh), and transfer the accrued revenues to the Treasury.

To finance the purchase of domestically produced substitute goods and to pay whole of part of profits on facilities being invested to raise production of the above-mentioned goods, equivalent of the funds transferred to the Treasury will be allocated to the related executive agencies in the framework of the annual budget bills.

The executive by-law of this Article including the manner of decision-making for domestic purchase, transferring the differential to the Treasury, the mechanism of payment to the relevant executive agencies, issuance of purchase guarantee to producers, as well as mechanisms for regulating the market for the said goods shall be proposed jointly by the Ministry of Commerce, the Central Bank of the Islamic Republic of Iran, and the Plan and Budget Organization, and to be approved by the Cabinet.

ARTICLE 88- To maximize utilization of the technical and engineering, production, industrial and executive potentials of the country, the executive agencies content of this Law are required to invite Iranian manufacturers and contractors to participate, in the framework of the Plan and Budget Organization’s qualification criteria, and in the light of the “Law of Maximization of Use of the Country’s Technical and Engineering Abilities”, and provide domestic and foreign contractors, consultants and manufacturers with equal terms of foreign exchange and rial.

ARTICLE 89- To support production and exports, all the executive agencies who use foreign exchange for the purchase of goods or for the execution of projects are required to pay a minimum of ten percent (10%) of the price of the goods or foreign exchange expenses of the project execution through delivery of domestically manufactured goods.

Exceptional cases shall be treated with the prior confirmation of the Economic Council or the related Minister.