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MP Says Currency Shock Unlikely Next Iranian Year

MP Says Currency Shock Unlikely Next Iranian YearMP Says Currency Shock Unlikely Next Iranian Year

Currency shocks in the Iranian market will be avoided in the next fiscal year if the demand for foreign currencies remains moderate, Mohammad Reza Pourebrahimi, parliamentary supervisor of the Money and Credit Council (MCC), said on Thursday.

So far this year, the Central Bank of Iran has successfully managed to stabilize the foreign exchange market, Eghtesad News quoted the lawmaker as saying. "The market shock will be out of the question if the CBI's disciplinary policy persists as before."

According to the parliamentarian, the demand and supply ratio in the Iranian exchange market is now "in the most balanced state it has ever been."  

The US dollar is currently traded at about 34,370 rials in the free market, while its value is officially announced at 27,708 rials per dollar. In 2012, the rial lost 70 percent of its value against the dollar as well as other major currencies. Since the Rouhani administration took office in mid-2013, fluctuations in exchange rates have been reduced and the market has relatively been stabilized.

Unconfirmed reports are now suggesting that the government may let the national currency depreciate in the coming year, as the budget would face a deficit given plunging oil prices. Experts however believe speculations are unlikely to connect with reality as the move could bring about inflationary impacts, which is not welcome by government officials.

The Rouhani administration has been struggling in the past 18 months to curb inflation and therefore is now unlikely to let any policy reverse the inflation downtrend. Inflation has fallen from 40 percent in 2013 to below 16 now.

On deposit rates, the lawmaker said, "The MCC may approve cuts in deposit rates," ranging now between 10 percent for sight deposits to 22 percent for one-year deposits.

If inflation remains stable for a six-month period, deposit rates must also decrease, he noted. "This would be to the benefit of the banks as their working capital would be unlocked."

 

Financialtribune.com