Economy, Business And Markets

Lack of Finance Hindering Production

Lack of Finance Hindering ProductionLack of Finance Hindering Production

A parliamentarian has blamed the limited financial resources and high interest rates on loans as two major problems nearly 80 percent of manufacturing units across Iran are struggling with.

“The two obstacles are the main drawbacks in the domestic economy and the parliament is trying to address them,” IRNA quoted Mohammad Reza Pourebrahimi, the parliamentary supervisor of the Money and Credit Council (MCC), as saying.

To address cash flow problems of industrial units, banks need to provide loans with lower interest rates, he said on Saturday. “Only then would the manufacturing cycle function efficiently and the economy advance.

The interest rate currently offered by banks is about 28 percent for business loans.

Speaker Ali Larijani asked parliament’s research center in December to provide feasible solutions to the issue.

With the joint efforts of the government and the parliament during the past six months the bill for removing obstacles hindering production has progressed, the lawmaker said, explaining that the ministry of economic affairs and finance and the vice president office for planning and supervision have been working to finalize the key bill.

Manufacturing units are struggling with cash flow problems, but commercial lenders are unable to offer loans as their NPLs or non-performing loans are increasing to worrying levels.

The loans currently offered by banks have high interest rates. President Hassan Rouhani met with top banking executives and central bank officials in December in a bid to correct interest rates in line with decreased inflation rates.

Pourebrahimi said it is not affordable for manufacturing units to pay back high interest loans offered by banks.

“Although the parliament supports the president’s approach for decreasing interest rates, the prerequisite for such a change is to control inflation,” he said.

The government’s efforts to curb inflation are satisfactory, he said. However, he called for more planning to curb inflation further.

“Although inflation rates have decreased over the past few months, it is still too early to make major economic decisions,” he said. “End of this fiscal year would be a proper time to deliver a comprehensive assessment and consecutively take the needed measures,” he suggested.

If the government can keep inflation low, the MCC can also take measures to reduce interest rates on loans, he added. Inflation is now hovering around its lowest level since Rouhani took office 19 months ago.