Data released by the Central Bank of Iran show broad money registered a slight monthly decline in the first month of current fiscal year ending April 20.
Broad money stood at 48,234 trillion rials ($155 billion) by that period, which was 0.2% or 90 trillion rials ($290 million) lower on the month before. Data also indicate an increase of 38.2% or 1,333 trillion rials ($4.3 billion) over 12 months to April 20.
The CBI did not release data on the monetary base in its analytic report of key macroeconomic variables that is released every month.
According to data compiled by the EcoIran web TV, Financial Tribune's sister media outlet, this was the first time in recent years that the monthly growth of broad money was negative.
The CBI did not say why and how the broad money had dropped. However, EcoIran ascribed the decline to the decline in bank debts to the CBI.
Some analysts also link the decline to the fact that the government did not borrow for discretionary spending from the CBI in the month.
Senior economic officials have said that the government will tap funds deposited by state companies with the CBI to meet its budgetary needs in the first months of the current fiscal year that started in March and borrowing for discretionary spending would be the last resort.
Last year, Iran’s Plan and Budget Organization said that the government borrowed 400 trillion rials ($1.3 billion) for discretionary spending from the CBI in the first two months of last fiscal year (March 21-May 20).
As for the components of money supply, the CBI said that the money (M1) stood at 9,500 trillion rials ($30.6 billion), showing 43.8% hike on April 2021.
M1 is composed of physical currency and coins, demand deposits, travelers' checks, other checkable deposits and negotiable order of withdrawal (NOW) accounts. It includes the most liquid portions of the money supply because it contains currency and assets that either are or can be quickly converted to cash.
On the flip side, near money (M2) stood at 38,873 trillion rials ($125 billion), increasing 36.9% on annualized basis.
M2, also called near-money, refers to less liquid assets that can be quickly exchanged for cash. Examples are bank certificates of deposit and treasury bills.
The contribution of M1 to broad money supply stood at 19.7%, down from 20.4% the month before. M2 accounted for 80.3% of the total money supply in the economy.
M1 is seen as one key inflation-generating component of money supply. Monetary experts opine that higher M1 growth could be a sign of rise in inflation expectations.
According to the CBI report, transfer of the general ledger of Mehr Eqtesad Bank to Bank Sepah explains 2.6% of broad money growth.
General ledger provides a record of financial transactions that take place during the life of a company and holds account information that is needed to prepare the company’s financial statements. Transaction data is segregated, by type, into accounts for assets, liabilities, owners’ equity, revenues, and expenses.
Transferring bank ledgers was the final phase of a major bank merger that started in early 2019. It involved Bank Sepah, the oldest in Iran and one of the three still under government ownership, four banks and one credit institution owned by the armed forces, namely Ansar Bank, Bank Hekamat Iranian, Mehr Eqtesad Bank, Ghavamin Bank and Kosar Credit Institution.
