Development of a package to realize inflation control and production growth
According to Iran Economist In his monthly meeting with a group of economists, Mohammadreza Farzin from the Central Bank, referring to the naming of the new year under the title of “inflation control and production growth”, said: it is very difficult to fulfill these two conditions in the field of economics; Therefore, policies should be in such a way that while curbing inflation, it provides the necessary resources for economic growth and production. Accordingly, from the beginning of this year, we have designed a package to realize this, and in this package, our main focus is on monetary, financial, foreign exchange and commercial policies.
He continued: If we are looking to reduce the inflation rate and guide this rate to channels below 40%, one of the most important variables in this regard is the exchange rate. Of course, the exchange rate is highly influenced by our expectations, economic diplomacy and foreign currency sources abroad. Therefore, we have to implement a set of policies that are part of the government and governance. In this way, we can reduce inflationary expectations and the inflation rate at the same time. Of course, I must remind you that it is difficult to reduce the inflation rate, because we have experienced inflation above 40% for four years.
Regarding the designed package, the Governor of the Central Bank stated: The said policy package is a complete package in various areas and tasks are assigned to almost all the institutions. For example, we considered a task for the Ministry of Foreign Affairs; Because we believe their role is important in the field of currency.
Using different tools to calm the currency market
Farzin added: Of course, this will has also been created in the government, and the president personally holds various meetings and follows up on this matter.
The highest official of the Central Bank stated that in the field of foreign exchange policies, the focus is still on the currency and gold exchange center, and clarified: We are looking to use different tools to calm the foreign exchange market, and therefore, in order to be able to meet the country’s foreign exchange needs from At the beginning of the year, we formed a committee and made a detailed estimate of foreign exchange sources and expenses, and based on that, we insist that the orders and allocation of foreign currency be done in the central bank.
He pointed out: I believe that the currency cannot be controlled only by the rate, but in terms of quantitative policies, regulation and control of different markets should be entered into this issue and different actors in the currency market should be monitored.
Regarding the other programs of this bank to manage the foreign exchange market, the head of the central bank said: we should be able to use various market tools in the exchange center, including forwards and swaps; Of course, in the meantime, the currency stabilization fund will be launched soon, and we are writing its regulations so that in times of crisis, we will have the necessary resources and use different methods to stabilize the currency market in the country.
Also, according to the head of the central bank, a plan regarding offshore rials for the markets of Afghanistan and Iraq is under consideration.
Foreign exchange market operators must be subject to the country’s currency regulations
The head of the Money and Credit Council stated that currency market operators should be subject to the currency regulations of the country; He emphasized: There are active participants in the foreign exchange market, including exporters, importers, various companies, and money changers, all of whom must be subject to the country’s foreign exchange regulations. Because if we do not apply the regulations and do not have the necessary supervision, we cannot control the market. For this reason, we have implemented extensive activities in this regard so that we can regulate various institutions and govern various regulations and have sufficient supervision over it. In order to obtain sufficient focus on the entire currency resources of the country. From this point of view, a large part of the control of the foreign exchange market is related to its management, so we are following up on these issues on the supply side, and the government also has the necessary cooperation. Based on this, our management system has made great progress both in the management of domestic and foreign currencies.
He continued: In the field of foreign currency spending, it is difficult to have an exchange rate sanction in the current situation, but we welcome expert opinions and suggestions in this regard.
Regarding the currency of 28,500 and its difference with the currency of 4,200 Tomans, Farzin said: The currency of 28,500 Tomans is from the place where oil is sold and not from the currency of exporters, and it is completely different from the currency of 4,200 Tomans. When we cut the currency of 4,200 Tomans, the currency of basic goods was supplied with 4,200 Tomans, and at the same time, the food shocks caused by the removal of the preferred currency (4,200 Tomans) which coincided with the war in Ukraine and the increase in global food prices also led to an increase in food prices. It became a food in our country. For this reason, we stopped at 28,500 oil currency this time.
He added: Of course, I have emphasized many times that the currency of 28,500 tomans is different from 4,200 tomans. To put it better, there was no currency called 4200; Rather, at that time, the government bought 15,000 Tomans worth of currency and told the Central Bank to give 4,200 Tomans worth of currency, and the difference would lead to an increase in the monetary base. But we buy 28,200 and sell 28,500. So the monetary base does not grow. In any case, if we can keep the currency in a stable range, then we can hope to improve expectations in the society.
Solving banks’ dissatisfaction is the main focus of monetary policy this year
The Governor General of the Central Bank considered the fundamental problem of the banking system to be imbalance and said: This issue is related to the imbalance between the government and the banks. This means that the government transfers its dissatisfaction and costs to the banks. Just like what happens to state banks from the side of the government and transferring its costs to them.
He reminded: Of course, some of our banks have been out of balance for years, and of course it is not possible for banks to continue their activities. Therefore, this year, in the field of monetary policy, we first focused on resolving the disharmony of banks. Because we believe that if a bank cannot resolve its dissatisfaction in the form of the reform program of the central bank, its next step is Resolution.
Referring to the Central Bank’s reform program, Farzin said: We have given reform programs to each of the banks and set schedules for them. Of course, as I have mentioned many times, part of the corrective measures are also related to the assemblies of banks and shareholders. In any case, we hope that with the rule of monetary discipline in the country, dissatisfaction will be reduced.
The head of the Money and Credit Council cited the centralization of the accounts of state-owned companies in the Central Bank as one of the reasons for the intensification of the banks’ dissatisfaction, and said: Currently, about 280 accounts due to the concentration of the accounts of state-owned companies in the Central Bank have been consolidated, which has reduced the circulation of money in the banks. and has increased their dissatisfaction. Of course, there are various reasons for dissatisfaction in the banking network, and we follow up each of these cases separately and clearly in the form of written meetings.
In the end, the Governor of the Central Bank added: “In the field of production growth, we are also interested in using expert opinions and suggestions, and we believe that domestic and foreign financing and investments are necessary for national plans.”