CBI: Gov’t Indiscipline Not Supported by Facts

The Central Bank of Iran has responded to a media story accusing the government of monetary indiscipline.

A report titled “Record 157% Increase in Government Borrowing from Central Bank” was published by the conservative-leaning Fars News Agency, rapping the administration of President Hassan Rouhani for its payment arrears.

In a statement published on its official website, CBI called it “an untrue picture of the performance and monetary discipline of the government”.

Debts of the whole government sector –government and government-owned companies–have jumped to 597.5 trillion rials ($15.93 billion) by the end of the 11th month of the previous fiscal year (February 18) from 351.8 trillion rials ($9.36 billion) on August 22, 2013–when Rouhani took office.

Government arrears to CBI were the main reason behind the increase, constituting 73.3% of that amount at 180.2 trillion rials ($4.8 billion).

According to the central bank, a survey of the debts shows that in this 42-month period, the main reason behind the rise in government debts to CBI has been “a 105.7-trillion-rial ($2.8 billion) increase in government commitments and a 58.5-trillion-rial ($1.56 billion) rise in government withdrawals from its revolving facility in the treasury”.

The commitments include promissory notes that CBI leaves with the International Monetary Fund on behalf of the government as its share in the fund.

Therefore, notes the central bank, “the rise in debts emanating from this does not mean an increase in the monetary base because no money is injected into the economy as a result of the surge in the indicator”.

Furthermore, the government is legally allowed to annually borrow an amount equal to 3% of the budget from CBI’s resources (its revolving facility) and return it by the yearend, which amount has gone up because the total amount of the annual budget has increased and oil revenues have declined significantly.