On June 4 and 5, a robbery took place from a Bank Melli Iran branch of Tehran from safe deposit boxes.
As many as 162 out of 250 rented safe boxes were robbed; burglars fled to one of the neighboring countries but were apprehended by police and returned to Iran.
Abdolnasser Hemmati, a former chairman of the Central Bank of Iran, said, “Billions of dollars of these dormant assets could have been invested in the country to offset the negative impacts of sanctions. What is necessary here is the promotion of economic stability and predictability.”
The Persian daily Etemad published an interview with economist Morteza Afqah, on this matter. A translation of the interview follows:
The Iranian economy suffers from instability; laws and policies in all economic sectors are unstable and the country is economically sensitive, as the risk of investments has also been maximized.
What the investor usually considers first is optimism about the future. If they are to invest in productive projects, they will often pursue a long-term objective, an investment that will make profit for at least two decades, but ever since the Islamic Revolution, the country has been grappling with either instability in foreign relations or instability in domestic relations or both. Therefore, it is reasonable that no investor would be interested in putting their money in Iran for long-term returns.
At the same time, a significant number of people invested in Iran during the past three decades to enjoy the government’s rent; rent was an incentive for some people to invest. But now, thanks to instability and insecurity, the risk of investment relative to the return on investment has increased and even those who were interested in the government’s rent are no longer willing to invest in Iran.
When inflation rates are rising and the value of the national currency is falling sharply on a daily basis, it is logical for people, both consumers and producers, to convert their rials to assets that are portable like gold coin and foreign currencies
Besides the fact that some of the capital in the country has been stored in safe deposit boxes in the last couple of years, a significant proportion has been channeled abroad (Turkey, the UAE, etc.); the media has time and again warned about this.
It is economically rational for people to take measures to protect their assets; some of these assets are invested in unproductive, unsupervised activities. It is probable that the same amount of assets is being kept at home and in safe deposit boxes.
During the presidency of Mahmoud Ahmadinejad, tensions with the world were at an all-time high, but oil revenues were high and capital flight was not apparent. However, due to the new Iranian administration’s hard line against the United States and the West, the feeling of insecurity has intensified. This has led people of all walks of life to convert their cash into portable and valuable assets, first to protect the value of their assets and second, promptly react to insecurity and special regional developments.
When inflation rates are rising and the value of the national currency is falling sharply on a daily basis, it is logical for people, both consumers and producers, to convert their rials to assets that are portable like gold coin and foreign currencies.
You can’t tell people to change their behavior. The only thing we can do is to lay the foundation for investment. Naturally, people pursue investment to increase their wellbeing; they will make investment when the stage is set and the risk of investment is low.
Some of the behaviors of officials, such as the recent announcement made by the governor of the central bank [Ali Salehabadi] who said: “We have enough currency”, are not understandable at all; if there is enough currency, the government should control the depreciation of local currency by increasing its market supply. People’s trust in officials declines when they make a promise but fail to deliver.
As we speak, no positive political development has taken place; nuclear negotiations have reached an impasse, maneuvers by the United States and Arab countries in the Persian Gulf are worrying to investors and consumers; they are converting their capital into foreign currencies and gold. Consumers are also making excessive purchases; both of these behaviors are leading to further instability in the economy.
Given what happened to Bank Melli Iran, the banks themselves are no longer safe for investment, people will be inclined to withdraw their assets from safe deposit boxes and even keep them at home or move them abroad.
The key question is: “Why do people not open foreign currency deposits even though they have foreign currencies?” Because they are concerned about the government’s empty promises. During Ahmadinejad’s presidency, foreign currency depositors were given rials instead, and at lower exchange rates; this made people lose confidence in banks.
