Details of changes in monetary base / relative decrease in monetary base growth and increase in public sector deposits with the central bank

According to Fars News Agency, in recent weeks, the growth of the monetary base has been relatively reduced and only the composition of the monetary base components has changed; Thus, the net decrease in the central bank’s claims on the public sector has been replaced by an increase in government deposits with the central bank due to an increase in government deposits with the central bank.

The overdraft variable of banks and credit institutions from the central bank is overnight in nature and can show high fluctuations in very short periods. According to the statistics of the last three months, the overdraft of banks from amounts over 900 thousand billion rials in late November 1400 to figures less than 400 thousand billion rials in mid-December 1400 had reached. This issue is also unprecedented in recent years, so that in the late October In 1399, the overdraft of banks and credit institutions from the Central Bank experienced a sharp increase and reached figures above 1000 thousand billion rials.

اضافهBecause the overdraft of banks and credit institutions from the central bank’s resources means the negative of the bank’s current account with the central bank (the bank owes to the central bank) to the extent of the resource deficit to fully settle all daily transactions related to that bank; Therefore, the factors affecting each of the inflows and outflows to the account can affect the changes in banks’ overdrafts. Therefore, changes in bank overdrafts are not only affected by the micro-financial behavior of banks and credit institutions, and the financial behavior of other institutions, including the government and state-owned companies, the central bank, other banks and enterprises can also lead to changes in bank overdrafts.

On this basis, it is observed that during the years 1398 and 1399, following a sharp increase in the net foreign assets of the Central Bank and increase the allowable salary ceiling of the Treasury (from 3% of the general budget to 5.5 and 6% in the two years, respectively) and to As a result of the sharp increase in the monetary base, the injection of reserves into the banking network increased significantly, which caused banks to resort to overdrafts from the central bank to cover their resource deficits, and finally, the share of banks’s debt to the central bank. Decreased monetary base growth. In other words, in the two years, the increase in the monetary base from the net foreign assets of the central bank and the net claims of the central bank on the public sector, has paved the way for increasing the resources available to banks and providing the required reserves.

اخیرIn recent months, despite the fluctuations in the overdraft of banks and credit institutions from the Central Bank, the growth of the monetary base has not changed much, so that according to the latest statistics and monetary information, the monetary base growth at the end of the week ending 1400.10 16. Compared to the same week last year, the figure was 36.2 percent. Meanwhile, the twelve-month growth of the monetary base at the end of December 1400 was equal to 37.6 percent. Thus, it can be seen that in recent weeks the growth of the monetary base has been relatively reduced and only the composition of the monetary base components has changed; Thus, the net decrease in the central bank’s receivables from the public sector has been replaced by an increase in bank overdrafts from the central bank (increase in bank debt to the central bank) due to an increase in government deposits with the central bank.

‌ Based on the latest information published by the Central Bank, Although the Overdraft of banks from the central bank at the end of the week ending 1400.10.2 Compared to the week ending 1400.10.16, the amount of 185 thousand billion rials has increased, but in contrast to the amount of public sector deposits with the central bank in two The mentioned week has increased by 393.5 thousand billion Rials, which is more than double the growth rate of banks’ overdrafts, which shows the relative decrease in the growth of the monetary base (chart below).

Chart – Change in the composition of monetary base components (thousand billion rials)

Regarding the increase of government deposits with the Central Bank, it is necessary to explain that according to paragraph (b) of Article (17) of the Sixth Development Plan Law and also paragraph (a) of Article (20) of the Law on Permanent Provisions of Development Plans, all bank accounts, including Rials and Currency for ministries, institutions, companies, organizations, governmental universities and government credits of public non-governmental organizations is available only through the Treasury of the whole country and with the Central Bank. Thus, it is observed that with the increase of government deposits with the central bank, banks have access to less resources and compensate it by overdrafting banks from the central bank. Of course, it should be noted that at the expense of the government, these resources will be returned to the banking network and bank overdrafts will be reduced.

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