Economy, Business And Markets

Unfrozen Assets Could Be Used to Control liquidity

Unfrozen Assets Could Be Used to Control liquidityUnfrozen Assets Could Be Used to Control liquidity

While Iran’s historic nuclear deal with the world powers will give Tehran access to its blocked assets, a banking expert said $23 billion in unfrozen assets would be transferred to the Central Bank of Iran’s account, which the bank can sell to control liquidity, provided that the total value of its foreign assets remains unchanged.

Reports claim Iran may obtain access to over $100 billion of frozen assets, but CBI officials say only $29 billion are now accessible, of which $23 billion belong to the central bank as international reserves and $6 billion, mainly the proceeds of oil sales, belong to the government. The rest, as claimed by the media, is already being used by Iran’s oil, petrochemical and gas industries.

Citing Bahaoddin Hosseini Hashemi, former CEO of Bank Saderat and Tat Bank, Banker news websites said as the central bank is responsible for market equilibrium, it is legally authorized to convert one kind of assets, including gold, securities and foreign currencies, into another to help boost business and stimulate economic growth.

“As the CBI has already paid the equivalent of frozen assets in local currency to the government, the released funds currently belong to the bank and have been recorded in the central banks’ balance sheet,” he said.

Therefore, he added, the CBI is authorized to sell its foreign assets in exchange for rial as a policy to curb growing liquidity.

The change in assets’ composition should not affect central bank’s total value of foreign assets.

“In case of any trade deficit, resulting from a negative balance between Iran’s imports and exports, the central bank can utilize its currency reserves to fill the trade gap,” he said.

“However, to avoid a negative balance sheet, CBI is required to increase other assets like its gold reserves.”