Improving financial discipline and financing strategy in the state-run economic sectors is a priority of the Central Bank of Iran, said Jafar Mehdizadeh, managing director of the bank’s economic research wing. The regulating body is trying to curb government domination over the banking sector.
President Rouhani’s administration remains committed to monetary and financial discipline and the government has not imposed added debt burden on the struggling banking industry, the official said.
“The government is keen on pursuing a healthy procedure for liquidity growth by controlling the constituent parts of the money base,” the CBI website quoted him as saying on Monday.
Mehdizadeh dismissed concerns aired in some quartets and news outlets about the rise in government debts to banks saying that the figures may be misleading.
He claimed that the government debt to banks in the first quarter of the calendar year that ended on June 21 “has not risen compared to the previous quarter but rather has seen a “relative decline” in the same time-span.
Elaborating the point he said the government’s use of the treasury’s “revolving fund” is the reason for the “perceived increase”
in government debts. The government replenishes the fund by repaying money used from the account at the end of each year and therefore including the share of the revolving fund in the quarterly calculations is misleading.
“The revolving fund accounts for 26% of government debt in the first quarter and excluding that shows that the government debt has declined in this quarter compared to the end of last year (ended March 20).
Paying closer attention to the decline in government debt shows that the administration has observed discipline in direct borrowing from the CBI, according to Mehdizadeh. He added that keeping up the same spirit of discipline is “crucial for protecting the government’s achievements in curbing inflation”.
