Economy, Business And Markets

Budget USD Rate May Vary

Budget USD Rate May VaryBudget USD Rate May Vary

The minimum rate set for the dollar in the next year's budget might be subject to change, said Central Bank Governor Valiollah Seif on Tuesday.

The government set the rate of the dollar at 28,500 rials in the budget proposed to the parliament on Dec. 7. In the current budget, the rate was set at 26,500 rials.

"The rate has been announced based on current calculations," Seif asserted. But, he added, "It does not bring about any commitment for the government to maintain the rate."

The rate might change accordingly if economic situation changes, he explained.

The governor was making the comments in a meeting with Planning Council of Tehran Province's officials.

  Loans to Industries

Elsewhere in a meeting with CEOs of commercial banks and credit and financial institutions, Seif said that the banking system has given 1,770 trillion rials ($6.5 billion at official exchange rate) worth of loans during the seven months since the beginning of the current year (March 21 - October 22).

According to Seif, the banks were instructed to allocate 60 percent of their loans to manufacturing industries, a goal which is nearly to be achieved. So far 59.8 percent of total loans provided by the commercial banks have been allocated to manufacturing units which needed to increase their cash flow.

"The banking system, thus, has fulfilled the responsibility it has been assigned with," said Seif.

He also said that the banking system's performance has undoubtedly played a key role in achieving the 4.6 economic growth rate in the spring 2014.

The minister of economic affair and finance, Ali Tayebnia, the government spokesman, Mohammad Bagher Nobakht; the minister of roads and urban development, Abbas Akhundi; the minister of cooperative, labor and social welfare, Ali Rabiee; and the minister of industry, mine and trade also attended the event.                                                                    

 Criticism to Banks

The minister of economic affairs and finance on Tuesday criticized Iranian commercial banks for having a tendency toward business activities.

Speaking in a meeting with CEOs of commercial banks and other credit and financial institutions, Ali Tayebnia called on the banks to avoid non-banking business and focus instead on providing financing for manufacturing projects.

He expressed regrets that most banks use their financial resources to manage their own business projects.

Describing banks as main contributors in bringing about economic growth, the minister said the banking system needs to finance the cash flow needed by small and large industries in the first place to help them exit recession.  

Most of Iran’s industries have been in recession for the past few years due to crippling economic sanctions and macro mismanagement.

 Interest Rate

The government expects commercial banks to offer higher interest rates on deposits than the inflation rate, in a bid to collect more financing for the manufacturing sector, Tayebnia said.

His remark on the interest rate contradicts Seif’s recent announcement for a bid to urge banks to reduce interest rates.

Maintaining a healthy competition among state-owned and private banks and other credit and financial institutes can lead to decreased financing costs for manufacturing,” Tayebnia said. “However, this is not the case now,” he said.