The Economy Minister Ehsan Khandouzi unveiled a plan of action Wednesday to control galloping inflation and boost economic growth.
The much awaited roadmap was discussed at a meeting of the Government Economic Coordination Headquarters late on Tuesday.
Boosting production and improving the business environment tops the to-do list of the Raisi administration, IRNA reported.
“This can, and should, be done first by removing hurdles in the way of production units,” the minister was quoted saying. Cutting taxes on manufactures and obliging those involved in speculation business to pay more is central to the plan.
It says the government will pay more attention to megaprojects to create jobs and increase forex revenue.
To finance megaprojects, the minister enumerated three methods, namely encouraging foreign partnership, particularly with friendly nations and neighbors, setting up project funds, and tapping into investment funds of banks.
Significance has been given to financial and banking support as well as changes in budgeting procedures to curb inflation that officially is reported in the region of 50% and above.
The Central Bank of Iran and Plan and Budget Organization have been tasked to enforce measures to control inflation arising from budget deficits, weak balance sheets of banks and high interest rates.
“Banking measures include employing monetary policy instruments to control banks’ balance sheets on a monthly basis and adjust interest rates via open market operations”.
OMOs were launched by the CBI in early 2020. Using bonds as collateral to borrow from the CBI and regulating interbank rates are the primary features of the OMO.
As for measures to control budget deficits, Khandouzi pointed to efforts to “secure sustainable revenues, ceding excess assets owned by the state/government and reducing government spending.”
The deep holes in government budgets in recent years has led to staggering growth in money supply and the monetary base, which by extension has pushed up the inflation rate to levels unseen in modern Iranian history.
Data released by the Statistical Center of Iran show the average goods and services Consumer Price Index in the 12-month period to October jumped 45.4% compared to the corresponding period the year before.
Government budget deficits are seen as the main driver of exploding money supply. The absence of sustainable revenue and the unprecedented decline in oil revenue since 2018 has led to persistent deficit spending. The US economic blockade has indeed taken a heavy toll on crude oil export, the lifeblood of the economy.
