Valiollah Seif is peculiar in more ways than one. He took over as chief of the Central Bank of Iran at a time when the economy had plunged into one its worst recessions in recent memory. International oil prices had slumped; western sanctions on the banking system and the oil industry were taking a high toll; galloping inflation and non-performing loans had saddled policy makers rendering them unable and unwilling to implement major reforms to salvage the national economy. Last but not the least, the semblance of CBI credibility as an independent body for making monetary decisions had been greatly tarnished.
Despite the high stakes and monumental challenges, Seif considers himself a "lucky" man who is working with a stellar team. Although the atmosphere was heavily against him during his first days in office, when many doubted his abilities as an "accountant" to become the bank's top policymaker, now his declared effort to check the double-digit inflation and his sleight of hand in promoting business lending has made him a darling of the Rouhani administration.
In a landmark interview with the weekly Tejarate Farda -- Financial Tribune's Persian-language sister publication -- released on Monday, Seif said working with President Hassan Rouhani has given him a boon his predecessors were deprived of in bygone governments.
"I think the central bank today enjoys its highest level of independence in the post-Islamic Revolution era," he says, adding that much of the decorum emanates from Rouhani's grasp of monetary policies and its effect on the economy.
When discussions inevitably get heated in Cabinet meetings, the president almost always pays heed to Seif's recommendations and often sides with him when disputes make it awkward to forge a compromise.
But the senior banker acknowledges that without cooperation from fellow cabinet members -- some of whom may include his opponents -- the colossal task of curbing hyperinflation and securing economic recovery would have been impossible.
He felt no inhibitions about airing his points of divergence with cabinet members such as Mohammad Reza Nematzadeh, the minster of industries, mining and trade and Abbas Akhoundi, the minster of roads and housing development, the two key ministries in dire need of cash to revive projects long on hold.
"It is natural for the central bank to be pushed persistently for loans from different sectors. But the reality is that we cannot force the banking industry to always respond in the affirmative."
Seif says the liquidity crisis which has hit banks in recent months has simply made it impossible for lenders to splurge loans on massive projects, something that triggered the present precarious situation in the first place.
Double Trouble
Seif considers the delicate task of curbing inflation and at the same time stimulating sagging growth as his holy grail. Lowering inflation to 15% now from a whopping 40% only two years ago is Rouhani's towering economic achievement.
He adds that taking on fighting inflation is not only a top priority for the president but also a policy priority of the highest order. But the war on inflation entered a new phase after the Leader Ayatollah Seyed Ali Khamenei last week hailed government's initiative to contain the problem but said the struggle should continue until inflation is of the single-digit order.
Seif is not oblivious to the fact that tightening monetary rules could slow growth as inflation languishes and says the bank is holding meetings to consider further cuts in interest rates or other relevant measures.
He is a strong advocate of a market-based foreign exchange regime and insists that the economy would be better off if the CBI restrained itself from currency manipulation. He has similar views on interest rates, which he insists should be determined through the mechanism of supply and demand.
"But the exception would be when the market is rocked by overnight sentiments which may temporarily disrupt prices," he told the journal.
Head of Iran's top bank rejected claims that the government cannot help but play a decisive role in the forex market and said this was true only when oil prices were high and non-oil exports low.
As for the near future, the governor is wary of hazarding a definite prognosis but hopes for a 1% growth for the current year (started March 21).
"Our target is 3% growth which is very unlikely in the present order of things, but if the sanctions are lifted in December there will be more room for maneuver and we may achieve more."
