Minister of Economy Ali Tayyebnia has forecast a decline in money supply once Iran’s assets frozen overseas are released.
The minister spoke about the release of frozen dollars and its impact on the economy on Friday, saying the government is not authorized to spend the money since it belongs to the Central Bank of Iran, IRNA reported.
“The government had used that money in the past in Iranian rial and the funds will now go to the CBI coffers in dollar,” Tayyebnia said. “It has been planned that the country’s currency reserve abroad as well as the increased revenue from a surge in oil exports will be used to develop the private sector.”
Tayyebnia reiterated that since the released assets will not be spent by the government, it will not increase the money base.
Iran may reportedly obtain access to over $100 billion in frozen funds, 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.
Pundits had remarked in the past that CBI could curb growing liquidity by selling the foreign assets in exchange for rial.
Commenting on the real exchange rate for the US dollar, Tayyebnia reiterated that the rate should be determined by the free market.
“The real rate is what is being traded in the market now,” he said.
Many expected the rial to appreciate after the nuclear deal between Iran and major world powers in mid July, but that did not happen. Now some suspect government intervention in the forex market. The rial lost over 4% versus the dollar in the runup to the signing of the deal, but has regained all the lost territory.
