Banknotes are printed but secretly
The inflation rate in Iran has been above 4% since 2017 and the average inflation rate is twice the average inflation rate of the previous decades. The 13th government has repeatedly said that it will not borrow from the central bank by covering the money printing machine in paper and showing a special face, but experts say otherwise.
Statistical data shows that monetary indiscipline has increased in recent years. According to the report of the Tehran Chamber of Commerce on the monetary data situation of the central bank, the volume of liquidity has reached 6103 thousand billion tomans by the end of February last year, which shows a 32% increase compared to the same month of the previous year and a 26% increase compared to the end of 1400. In the same period, the monetary base has reached 809 thousand billion tomans with a significant increase of 39% compared to Bahman 1400. What is important about the country’s monetary data is that in recent years, an important part of the increase in liquidity is due to the increase in the monetary base, and the increasing coefficient of liquidity has had a positive effect on the growth of liquidity, with the exception of the years 2017 and 2018, as well as the eleven months of 1401. According to Jahan Sanat report, the only main dominant factor in the increase in liquidity during the eleven months of 1401 was the increase in the monetary base with a significant contribution of 38%, which is the highest figure in the last decade. Algebraic sum of the monetary base with the negative contribution of 6 percentage points of the liquidity increasing factor in the eleven months of 1401 has led to a 32% increase in liquidity.
According to the available data, in Bahman 1401, the increasing coefficient of liquidity was equal to 7.5, which is the reason for its decrease of 0.5 units compared to the same month of 1400 and its diminishing role in the growth of liquidity, the increase of 40% of legal reserves of banks with the central bank during the period It has been examined and approached to the figure of 684 thousand billion Tomans, which is approximately 11.4% of the total bank deposits. Although the increase in legal reserves of banks is aimed at exercising more control and supervision of the monetary supervisory authority on banks, it also affects the ability of the banking system to create liquidity and reduce their ability to provide facilities.
Three main drivers of liquidity growth
In general, various factors play a role in the growth of liquidity in Iran’s economy. The contribution of each of these factors is also different in different years. Examining the details of monetary statistics tells us that in the years 2014, 2018, 2019 and 2014, the increase in the net foreign assets of the central bank was very significant in the growth of liquidity. Although it is not possible to comment definitively on the reasons for the growth of the foreign assets of the Central Bank, it seems that the sale of currency by the government to the Central Bank with the aim of compensating the budget deficit was one of the reasons for this problem. In 2017, the dominant factor in the growth of liquidity was the debt of the public sector to the central bank. In the years 1993, 1996 and 1401, however, the contribution of banks’ debt to the Central Bank in the growth of liquidity has been very strong.
In general, the studies show that in recent years, due to the increase in the debts of the banks to the central bank, the contribution of these debts to the increase in liquidity (from the path of increasing the monetary base) has become stronger and at the end of Bahman 1401, it became a dominant factor with a contribution of 26.5 percentage points in the growth. Cash has become. In other words, about 83% of the liquidity growth in February 1401 was due to the increase in the banks’ debt to the central bank. Banks’ debt to the central bank at the end of February 1401 is almost 2.4 times the same figure at the end of 1400, the reason for its increase is due to the aggravation of banks’ imbalances and their need for liquidity. Among various banks, commercial banks, specialized banks, and non-governmental banks have contributed 18, 19, and 48 percentage points, respectively, in the 85% increase in banks’ debt to the central bank in Bahman 1401. The second most effective factor in the growth of liquidity in the eleven months of 1401 is the increase in the net foreign assets of the Central Bank with a contribution of about 11 percentage points. Although there is no exact information about the reason for the increase, it may have been the result of the government selling more foreign currency to the central bank to cover the deficit of the operating balance of the budget. In the following, public sector debt is one of the effective components in increasing liquidity, with the difference that during recent years, the amount of public sector deposits with the Central Bank has gradually increased (including due to the sale of bonds) and has caused the net debt of this sector to The difference between the debt and the deposit of the central bank becomes positive and the net debt of the public sector to the central bank has a reducing role in the growth of liquidity.