Liquidity Uptrend Stalled

Money supply reached 12.53 quadrillion rials ($335 billion) to register a growth of 23.2% in the previous Iranian year that ended on March 20, 2017, down from a 30% hike in the year before, said CBI’s deputy for economic affairs.

In recent years, the liquidity growth ratio has hovered between 22-30%. The figure accounts for monetary base and multiplier, which in the 10-month period ending Jan. 19 grew by 17.3% and 7.4% respectively, CBI data indicate.

“Iran has the 18th largest economy in the world with a per capita GDP (at purchasing power parity) of $1,382 billion while accounting for the lion’s share of gas reserves in the world, owning 18.2% of the total,” Peyman Qorbani was also quoted as saying by CBI’s official website.

Qorbani stressed that Iran is the fourth biggest owner of oil reserves, accounting for 9.3% of the total and has the largest mineral reserves in Middle East and ranks 10th in the world. It is placed 15th among countries with the most tourist attractions.

“Foreign exchange reserves exceed $100 billion and foreign debts are less than 3% of total GDP,” he said.

He pointed out that Iran’s exports have always been more than its imports, adding that during the first nine month of the previous Iranian year, the total amount of exports and imports stood at $60,292 million and $44,256 million, respectively, where oil exports accounted for $39,877 million of the total sum.

“Foreign debts only account for 2% of our total GDP, which is a good point for absorbing foreign investments since it indicates that Iran is perfectly capable of settling its foreign debts,” he said.   

Qorbani further said the Central Bank of Iran has fulfilled all its promises in the past three years and achieved a single-digit inflation rate.

“Inflation rate has been on a downward trend since October 2013 when it stood at 40.4%. Now it has been brought down to the 9.5% single-digit inflation rate after 26 years,” he said.  

The CBI deputy noted that increasing loan payouts and the share of working capital in the market has been CBI’s priority and in line with that, the banking system has allocated 168 trillion rials ($4.5 billion) in loans to 22,200 production units.

Qorbani said the financing system in Iran is bank oriented and said private banks now constitute 65% of the banking system.

“The banking system, with more than 21,000 branches across the country, shoulders 90% of financing while the capital market and foreign investments have only a small share. Therefore, we need to focus on absorbing foreign investments to make the market thrive,” he added.

He also mentioned that interbank rates are down to 18.6% from 28.1% last year.

The CBI official elaborated on the bank’s policies during President Hassan Rouhani’s tenure such as reforming the monetary policy, increasing CBI’s strength and creditworthiness, publishing economic data on a regular basis, controlling inflation rate, managing forex market fluctuations, directing national resources toward high-potential sectors and support small- and medium-sized enterprises, all of which have been in line with fostering international relations.

Qorbani also talked about economic growth that experienced a shock due to the drop in oil prices, but managed to stabilize and continue on its positive trend from last summer.