Economy, Business And Markets

IMF Backs Iran Link to Global Banking

IMF Backs Iran Link to Global BankingIMF Backs Iran Link to Global Banking

The International Monetary Fund will support Iran to reconnect with international banking networks, David Lipton, first deputy managing director of the IMF said in a meeting with Valiollah Seif, governor of the Central Bank of Iran, in Tehran on Monday.  

“The IMF can help Iran improve various aspects of its banking system, including anti-money laundering regulations and counter terrorism measures,” the CBI website quoted him as saying.

Lipton called on the government to focus on solving structural problems and said employing monetary policies alone to address structural deficiencies hinder, not help, the process of finding effective solutions.

Injecting liquidity into markets and increasing businesses debts is one of the main causes of the financial crises in Asia, he stressed. It should be noted that injecting huge amounts of money into businesses also may (later) translate into non-performing loans for the lenders and is a short-term solution, the senior IMF official warned.

“In fact, businesses that are close to banks will take out loans. Such loans would then turn into bad debts,” he warned, “This would make banks rely on the government when times are tough.”

Banks can and would be efficient players in the economy if and when they lend to businesses through the resources they have.

Addressing Iran’s plans for launching a debt market, Lipton said, “As a first step 15% of banks' bad debts should be offered in the debt market.”  

Seif briefed Lipton on the CBI’s achievements in lowering the rate of inflation from 40% in 2013 to 12% this year. "The CBI is seeking a single digit inflation rate.”

Banks are experiencing hard times as they do not have access to almost half their resources, he said, “15% of which are bad debts.”

Government debt to banks and nonperforming assets respectively account for 18% and 15% of the assets, the CBI chief said.

“Our measures for pulling the economy out of recession resulted in a surge in the liquidity,” he noted, “While liquidity increased by 23% in 2013, it grew by a whopping 30% in 2014.”

Pointing to CBI measures to reduce interest rates, Seif said, “We managed to lower interest rates from 29% to 22%, which is not yet satisfactory.”

Government’s debts have risen to 5 quadrillion rials ($164 billion), according the senior banker, for which a solution must be found soon. “A debt market is planned to attract resources needed by the government and to also perform as one of the CBI tools for implementing monetary policies.”

Lipton urged the CBI to sustain its policy of lowering the inflation rate, help improve the stability of markets and restrain from increasing the liquidity.

David Lipton arrived in Tehran on Sunday. He was due to call on the Oil Minister Bijan Namdar Zangeneh, head of Management and Planning Organization, Mohammad Baqir Nobakht, and the chief of presidential staff, Mohammad Nahavandian. The IMF delegation was to also meet economists, bankers and business leaders, the CBI website reported.