A Study on the Status of Agricultural Exports and Imports and Their Impact on Iran’s Non-Oil Trade Balance
Abstract
Based on Iran’s non-oil trade balance data, agricultural products constitute a significant share of the country’s non-oil exports. In 2023 (Iranian year 1402), agricultural products accounted for about 12 percent of the total value of Iran’s non-oil exports, amounting to approximately 6 billion USD. Therefore, the repatriation of foreign exchange revenues from agricultural exports has become increasingly important as a means of securing foreign currency resources and reducing the negative trade balance.
However, data on Iran’s foreign trade indicate a deterioration in the value-based trade balance in recent years. This has occurred despite an improvement in the weight-based trade balance, resulting from higher export volumes. Consequently, this situation raises concerns about the decline in the dollar price per unit of agricultural exports.
The Importance of Agricultural Exports and Trade Balance in Iran’s Non-Oil Export Sector
Over the past decade, Iran’s agricultural sector has accounted for about 13% of non-oil exports on average, reaching up to 18% during sanction years (2018–2020). This indicates the sector’s resilience and lower vulnerability to external shocks compared with other non-oil exports.
Analysis of Iran’s Agricultural Export Situation
1.Export Price Index of Agricultural Products
In recent years, Iran has been the only neighboring country to experience a continuous decline in the agricultural export price index, while others such as Afghanistan, Iraq, Pakistan, and Turkey have seen increases. This suggests that the decline in Iran’s export prices is domestic in origin, not a regional trend.
2. Export Destinations
Between 2014 and 2020, Iran’s main agricultural export destinations—Iraq, Afghanistan, the UAE, Russia, and Pakistan—remained largely unchanged. Therefore, the decline in export prices cannot be explained by changes in export markets.
3. Export Basket Composition
There has been no significant change in the composition of Iran’s agricultural export basket before and after 2018, implying that product mix shifts are not the main cause of reduced export value. The decline instead relates to lower unit export prices.
4. Pricing and Under-Invoicing
Exporters’ declared prices for high-value agricultural products are often lower than global and even domestic prices, indicating possible under-invoicing to avoid repatriating foreign currency earnings. This practice persists due to economic incentives, even in the presence of strict regulations.
Analysis of Iran’s Imports of Essential Agricultural Products
Since 2021, essential agricultural imports in Iran have faced a widening gap between global and import prices, likely due to over-invoicing to access subsidized currency, despite regulated price ceilings. Limited data prevents precise assessment.
Policy Recommendation
Current export and import currency policies encourage under- and over-invoicing, worsening Iran’s trade balance. Long-term solutions include removing centralized controls and letting exporters decide on currency repatriation, while short-term measures may focus on stricter price oversight for essential imports.
This study was conducted by Kianoush Jahanmardi at Money and Currency Think Tank in 2023.
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