CBI Pushing Ahead With Disinflationary Policies

Vice Governor of the Central Bank of Iran Akbar Komijani reviewed the latest developments in the Iranian economy, saying that the administration plans to curb the inflation rate even further.

In his speech to the latest annual South East Asia, New Zealand and Australia (SEANZA) regional group meeting in Tehran, Komijani said, "The central bank's management, combined with government planning, led to a good growth rate and a significant decrease in inflation rate that witnessed single-digit rates unseen in the past 25 years, but we intend to bring down the inflation rate to below 5% in the coming years," IBENA reported.

The Central Bank of Iran announced in 2016 that the country’s inflation rate dropped to 9.7% in the month to June 20. Thus, Iran’s inflation rate eased into single digits for the first time in a quarter century following the lifting of sanctions against Tehran after the implementation of a landmark nuclear agreement, known as the Joint Comprehensive Plan of Action, in January 2016.

Komijani noted that Iran's financial markets have remained stable in the past few years and the rial has gained in value whereas it had depreciated fast in the past.

"In the past two years, rial's slide against the US dollar has been lower than the difference in the inflation rate of the currency of other countries against the greenback, while we have also witnessed a decrease in oil prices, which has caused trouble for all oil-producing countries and not just Iran," he added.   

In late August 2016, Iran was selected as the rotating president of SEANZA with the CBI slated to host the 31st Governors’ Symposium in Tehran.

According to Ahmad Azizi, a top advisor to CBI Governor Valiollah Seif who was also present at the meeting, Iran was again chosen to host the next Governors' Symposium scheduled to be held in about eight months' time in Tehran.

"A one-week educational course in central banking will be held and the governors of the central banks of the member countries will discuss a number of points approved as part of today's meeting," he said.

The establishment of SEANZA grew out of a 1956 meeting of central bank governors from the Asia-Oceanic region. One of the oldest and largest regional central bank groups, membership in it grew from the original five to 20 while Iran joined in 1966.

SEANZA was formed to promote cooperation among central banks by providing intensive and systematic training courses for the staff of central banks. Training courses are held biennially with a rotating system of host members. It also provides an avenue for information exchange on issues and problems of common interest among member economies.

Shift to Non-Oil Growth

In his speech at the latest SEANZA meeting, Komijani pointed to the 12.5% GDP growth rate of Iran in the previous fiscal year (ended March 20, 2017) as the highest in the region and ascribed it mostly to a notable rise in oil exports and its high impact on the Iranian economy. He further referred to the country gaining access to its foreign bank accounts and offshore reserves as another reason behind the high growth rate.

"In the current year, gross domestic product will no longer depend on the oil sector, as the non-oil sector will play a more important role," he said.

As the CBI official pointed out, a team from the International Monetary Fund led by Catriona Purfield completed its Article IV Consultation with Iran last week. Their final report concluded that as Iran has begun to broaden its non-oil sector, real GDP growth is projected to expand 4.2% in the fiscal 2017-18 and is expected to be sustained or even rise toward 4.5% over the medium-term if the financial sector reforms take hold.

Inflation is projected to pick up temporarily in 2018-19 from 9.9% in 2017-18, if a fuel price increase proposed by the government in its annual budget law is approved, and return to single digits in the medium term aided by prudent policies.

"Our studies at the central bank indicate that we will witness a good economic growth rate across the macroeconomic landscape with the aid of reforms and we will manage to reach our goals with the help of the government," Komijani concluded.