Liquidity growth after 3 years was on the path of long-term average
According to the news of Poli Mali, the central bank responded to the article of the 14th of April in the newspaper “Kar and Kargar” with the title “Is hyperinflation on the way?” Point-to-point inflation in March 1401 broke the record of the last 50 years” he wrote: In this report, it is stated that according to the report of the Iranian Statistics Center, the point-to-point inflation rate in March 1401 broke the record of the last 50 years, so that the point inflation rate reached It has reached 63.9 percent.
In addition, in the mentioned report, referring to the liquidity and monetary base statistics, it is stated that the government is busy printing money and compensates the budget deficit by heavily borrowing from banks and forcing them to borrow from the central bank, and the growth rate The money sector or the inflationary sector of liquidity has reached 70%.
About the contents mentioned in the mentioned report, some points are provided as follows:
At the beginning, it should be noted that some of the concerns and expert opinions raised by economic experts about the conditions governing the country’s economy are among the important concerns that are also of concern to the country’s economic planners and policymakers; However, there are the following considerations regarding some of the points presented.
In the article published in Kar and Kargar newspaper, the source of the inflation statistics for the year 1401 of Iran Statistics Center is mentioned, while the statistics cited in this article are from the report of the total price index of consumer goods and services in urban areas of Iran, which is calculated and published by the Central Bank. , has been extracted.
Point-to-point inflation in February 2019 was 65.3%
In the above article, by inserting the question, is hyperinflation on the way? It has been stated that point-to-point inflation in March 1401 broke the record of the last 50 years; So that the spot inflation rate has reached 63.9%. Also, the inflation rate in the 12 months ending in March last year was 46.5%. The above claim has been made in a situation where, based on the available information, the point-to-point inflation of the price index of consumer goods and services in urban areas had experienced 65.3% in February 2019, which continued at the end of 1400 years with 35.8 percentage points decreased to 29.5%. Although affected by the implementation of the popularization policy of subsidies and the removal of preferential currency allocation and the inflationary expectations caused by this action and the war between Russia and Ukraine and the emergence of regional and international tensions, the moving trend of the point by point inflation rate in 1401 increased again and reached 63 in March. It has reached 9 percent. An important part of this inflation was caused by the non-adjustment of the preferred exchange rate from 2017 to May 1401, although the negative welfare effects caused by the implementation of the policy have been compensated to a large extent in the form of cash subsidy payments.
Liquidity growth after 3 years, in the path of long-term average
Regarding the performance of the government and the central bank in liquidity control, it is necessary to explain, the issue of controlling the growth of liquidity and inflation as one of the most important economic priorities of the government and the central bank has always been considered. Investigating the growth of liquidity in the last months of 1401 indicated the continuation of the decreasing trend of this variable as in previous months, so that the growth rate of liquidity decreased from 39.7% at the end of Bahman 1400 during a downward trend to 32.0% at the end of Bahman 1401. . Also, according to the latest available statistics, liquidity shows a growth of 27.8% and 32.5% in the middle of March 1401 (week ending March 11, 1401) compared to the end of March and the same week of 1400, respectively, and therefore it is expected that the program Adjusted money to control liquidity growth for the year 1401 will be realized and liquidity growth will reach about 30%.
Therefore, it can be seen that after three years (the growth of liquidity in 2018, 2019 and 2019 was equal to 31.3, 40.6 and 39.0% respectively) the central bank with the cooperation of the government in 2011 was able to increase liquidity which is the most important variable in controlling inflation, put it in the path of achieving the long-term average of this variable. It should be noted that this has been achieved in a situation where the country’s economy is still under the most severe and illegal sanctions.
The charge of printing money by the government is baseless
Regarding the increase in the debt of the banks to the central bank and consequently the growth of the monetary base in recent months, it should be noted that the major part of the overdrafts of banks and credit institutions is affected by factors such as balance sheet problems and their corporate governance, which is also in the short term and in one year. The latter has not been established and has been mainly focused on the past behavior of banks and the accumulation of various imbalances in their balance sheets.
In addition, the performance of banks and credit institutions in keeping at least three percent of their deposits in the form of Islamic financial bonds at the end of Bahman 1401 shows that there are a total of 1211.1 thousand billion Rials of Islamic financial bonds in the banks’ portfolios. Compared to the balance of deposits of the non-governmental sector with banks and credit institutions (59959.6 thousand billion rials), it is equal to 2.0%, which is lower than the regulatory limit. Therefore, it is clear that the phrase “the government is busy printing money and compensates the budget deficit by heavily borrowing from the banks and forcing them to borrow from the central bank” is baseless and completely contrary to the government’s financial performance and behavior in The year is 1401. In addition, the difference between the growth of liquidity and the growth of the monetary base is due to the implementation of the policy of controlling the growth of some banks’ balance sheets, which has significantly decreased the increasing coefficient of liquidity due to the increase of legal deposits of banks with the central bank.
The actions of the central bank in the field of reducing liquidity and stabilizing the economy
It is necessary to explain about the developments in the growth of money and its share of liquidity. In recent months, various factors (mainly affected by the publication of negative news) have led to the emergence of uncertainty and the formation of negative expectations regarding the developments in the foreign exchange market and, as a result, the increase in the exchange rate. The market became informal and inflationary expectations intensified. According to the existing conditions, the government and the central bank in line with managing inflationary expectations, controlling inflation, reducing liquidity and generally stabilizing the economy, have taken measures such as modifying interest rates with the aim of controlling inflation (approved by the Money and Credit Council in the meeting December 22, 1401) and its implementation from March 10, increasing the legal deposit ratio at the level of the banking network by half a percentage point (paragraph “3” of the forty-ninth minutes of the meeting of the Central Bank of January 3, 1401) and dealing seriously with delinquent banks and Unhealthy, supply of currency in exchanges and banks, supply of coins in the commodity exchange, setting up of a currency and gold exchange center with the aim of establishing price authority, increasing the volume of official transactions and ease of access for applicants to the currency and gold market and providing currency needed for the import of basic goods in the Nima system. , have followed the adaptation of the country’s foreign exchange and trade map in order to manage the flow of foreign exchange resources and expenses, etc. It is expected that with the recent policy actions of the Central Bank and also positive developments in the country’s foreign policy, stability in the currency market will increase in the coming months and inflation expectations and liquidity will decrease to their historical trends.
Directing liquidity towards economic productive sectors is the priority of the central bank
In relation to the topics raised in the field of monitoring the money creation of banks and the way of spending facilities, it is necessary to mention that the discussion of directing credit or liquidity of the economy towards the productive sectors and the need to allocate credit to strengthen the financing of production and lending to production units is always one of the important priorities. In recent years, the central bank has taken several measures in this regard, including supporting the financing of small and medium enterprises (SMEs), strengthening the approach of supporting special industries, providing credit to the productive sectors of the economy and Knowledge-based companies, development of financing tools for production chains and improvement of working capital management of economic enterprises, financing of construction and renovation of residential units under the obligation stipulated in the Housing Production Jump Law, and providing
The working capital of businesses pointed to this issue in recent years by granting more than 75% of payment facilities to different sectors. Also, while paying attention to the role and importance of monitoring banking activities, the Central Bank has, over the past years, developed strategic programs based on the continuous improvement of banks’ balance sheets and freeing up resources in order to increase the capacity of productive financing, strengthen the financial stability and health of banks and institutions under supervision and The focus has been on the implementation of precautionary policies. In this regard, the central bank has taken operational measures such as continuing to reform the ownership structure of banks and non-banking credit institutions, pursuing the capital increase of banks and non-banking credit institutions, intensifying the control and monitoring of the transfer of excess property and assets of banks and non-banking credit institutions, organizing the non-banking activities of banks and non-banking credit institutions. and their subsidiaries, monitoring the way credit institutions recognize income and preventing the identification and distribution of illusory profits, monitoring the resources and expenses of banks and non-bank credit institutions, and preventing the entry of banking network resources into speculative activities.