Renewed Debate on Liquidity, Loans
Economy, Business And Markets

Renewed Debate on Liquidity, Loans

A member of the Majlis Industry and Mining Commission says lack of liquidity and credit are among the most important challenges facing production units.
Hamid Reza Fouladgar, in a TV debate, referred to the lack of both liquidity and bank loans as the worst problems production units are grappling with.
“The economy has a liquidity of around 9.5-10 quadrillion rials ($307 billion-$324 billion) most of which is being used in non-productive sectors,” Fouladgar said.
“We must steer this liquidity toward production units. Some 160 trillion rials ($5.1 billion) were supposed to be allocated to production but has still not materialized.”
Ebrahim Jamili, head of Iran Economy House said a decrease in interest rates has freed up 130trillion-150 trillion rials ($4.2-4.8 billion) in banking resources and banks should disclose where this money is being used.”
Fouladgar opined that “Since deposit rates were lowered to 15% from 18%, lending rates too should have been cut from 21% to 18% without delay. But this was done after a two-month gap that obviously benefitted the banks.”
Jamili viewed the government’s foreign policy and decreasing the inflation rate as positive, but said it hardly had a stellar performance in the key economic sectors. “Seventy percent of non-performing loans are largely due the lack of oversight,” the lawmaker said without elaboration.
Mohammad Ali Karimi, head of the Central Bank of Iran public relations department, responded by saying that all the problems visiting the country should not be placed at the doorstep of the banking industry.
“There is a credit crunch which is the result of a long process,” he said.
The problems of production units need to be diagnosed with care and injecting liquidity could exacerbate the effects of the recession, he told the live TV program.
“In the first two months of the year ending May 20 , the banking system has released 490 trillion rials ($15.8 billion) in loans, more than two-thirds of which(66%) was in the form of working capital and 124 trillion rials ($4 billion) was paid to the industry and mining sector,” he said.
With all the grave problems notwithstanding, Karimi said, the banking system is assisting 7,500 limping production units by gradually paying 160 trillion rials ($5.1 billion) in loans. “Less than 50% of the 490 trillion rials in loans given in the two months were restructured loans.”


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