Economy, Business And Markets

Gov’t Will Expand Money Supply

Gov’t Will Expand Money Supply Gov’t Will Expand Money Supply

The cost of trade with the outside world will be 10% lower now that the sanctions have been lifted, Shapour Mohammadi, deputy minister of economy said on Saturday. “There is no precise way of determining the exact figure, but on average 10% seems reasonable.”

Asked about the government’s monetary policy in the coming year (beginning March20) he said the administration is pushing for an expansionary policy regarding the supply of money. “The government intends to stimulate consumer demand and pull the economy out of recession. Referring to the government’s recent incentive package that included auto and home appliances loans, he said the package has been successful in achieving its goals,” Mehr News Agency quoted him as saying.

Mohammadi said the banks allocated more than 60% of their loans to help meet the working capital needs of manufactures and the private sector this year. He added that more funds should be injected into the distressed economic sectors. “So far we have allocated resources to providing working capital. Henceforth the focus should shift to supporting the production sectors,” he said.

 To lift the economy “out of recession in a non-inflationary way, we need to take measures like increasing the capital of banks, improving the equity market, using foreign finance and other measures.”

Repaying government debts to the private sector and banks is a priority for the Ministry of Economy, he noted, and added that the government will issue 80 trillion rials ($2.6 trillion) in bonds to reduce its mountain of debt. “Expanding the debt market will help fiscal discipline and create opportunities for domestic and foreign companies.”

The government’s multi-billion-dollar debt to banks is a major challenge for President Rouhani’s administration. However, the Economy Minister Ali Tayyebnia said earlier this month that the issue is not with the amount of the debt but rather the chaotic state of the debt.

Mohammadi pointed to the underdeveloped state of the financial and banking sectors opining that the domestic money market is far from what is desired.

Lifting of sanctions presents an opportunity to revive the economy by utilizing “foreign assets, private sector capital and banking resources.”

Banks can be major players in the post-sanctions era and “the government will help increase their resources,” he said implying to plans to improve the lending power of banks saddled with the huge government debt and stressed assets.