Proper financing is an antidote to inflation

In today’s economy table, Mr. Majid Karimi, Director General of the Markets Office of the Ministry of Economy, Mehdi Ash’ari, an economic expert, and Mehdizadeh, the Director General of the Central Bank of Economics, examined the effect of liquidity on inflation and the government’s plan to control liquidity and answered the following questions:

Why does liquidity affect inflation?

Mr. Majid Karimi, Director General of the Markets Office of the Ministry of Economy: During the last 50 years, the growth rate of liquidity was such that liquidity increased 43 thousand times, while production increased less than 3 times, and this shows that these two are not compatible and there is no such thing in any country.

The main factor of inflation is liquidity, although other factors such as exchange rate, inflation expectations, production costs and foreign inflation also affect the production portfolio and all these factors cause shocks.

Since the beginning of the 13th government, we have had a decrease in the growth of liquidity, which is due to the actions of the central bank, and the inflation trend is decreasing.

Where did the president’s mission to the ministers of security, economy, planning and budget organization and the central bank reach regarding the anti-inflation package?

Mr. Karimi: An anti-inflation package has been prepared and announced, part of which is related to production, liquidity and exchange rate.

What the central bank has started is to control the balance sheet and not to create money (facilitating banks) freely.

The management of the package and the main custodian of this package is the central bank, and due to coordination and inflation, the government’s economic coordination headquarters is responsible for making decisions with other departments.

If the right method of financing is used, inflation will be reduced. for example; If a bank does not have capital, it should not create money without backing because it is like a bad check.

Should the micro-facilities that people receive be reduced or the large-facilities?

Mr. Karimi: We do not have a problem with micro-facilities because they are easily returned, but the issue of large-facilities is related to persons, in other words, a bank that does not have credit and so-called issues checks and gives facilities to those it is related to, should be controlled. to be

What should be done to neutralize inflation? Why didn’t this happen in the last 10 years?

Mr. Mehdi Ash’ari, economic expert: Liquidity is the source of inflation, although other factors can be effective in the short term. For example, the increase in food prices in the world can affect this issue, but the rate will return.

Now, the reason why we had general price inflation in the long run is related to liquidity.

In the country, we have a series of deficits whose income and expenditure do not match. For example, the social security of the pension fund’s income does not match the expenses. Car manufacturers suffer due to mandated prices, the gas company sells its gas at a low rate, which goes to the banking system or the government to compensate for the costs.

When they go to the government and get funds from the government, therefore, the government has to compensate its budget deficit from the central bank, but in recent years, institutions go to the banks, which has led to an increase in the debt to the banking network.

What is the coordinating package between government agencies and the economic team of the government in controlling inflation?

Mr. Ash’ari: To reduce inflation, the most important thing is that we need a contractionary monetary policy so that the growth of bank lending is lower than inflation.

The second issue is inflation control. In the country, inflation control has been confused with price control for a long time. If the government is serious about controlling inflation, the issue of price control should be abandoned and tomatoes and potatoes should not go to the market every day. This is a mistake. because it is the source of liquidity growth that occurs from the growth of the balance sheet in the banking network.

What should be done to control this volume of cash, which is a large number?

Mr. Ash’ari: Suppose we gave a facility of 100 billion tomans to a producer last year, and this year, taking into account 50% inflation, he demands 150 billion tomans, while by paying 120 billion tomans, inflation can be reduced, which automatically reduces the price of raw materials. to give

What are the Central Bank’s measures to reduce the liquidity growth rate to 2.2 percent?

Mr. Mahdizadeh, General Manager of Central Bank: When the growth of liquidity is greater than the growth of production and supply, it leads to an increase in the price level, and this is the root of many economic problems.

In relation to the question that after 9 years, we reached a negative liquidity growth in April this year, along with the good news, the production growth last year gives us hope.

What action did the central bank take last year to reduce liquidity growth?

Mr. Mehdizadeh: A series of measures were taken in the central bank, such as the formation of 2 liquidity committees and monitoring of liquidity, and this year the central bank has started to limit the growth of banks’ balance sheets and lending facilities in order to reduce the growth of liquidity, so that 2.5 percent for specialized banks and 2.5 percent for commercial banks. They must have 2% balance sheet growth, if a bank violates it, the central bank will deal with it.

What factors affect liquidity reduction?

Mr. Mehdizadeh: In one month of April, about 2 weeks of benefits are not paid due to holidays, and this year, like the previous years, this happened. But this year, the tightening of liquidity control measures led to a decrease in liquidity growth.

In the past years, we had a discussion about the government’s treasury, but this year, unlike the previous years, we did not have a government’s debt, finally, the growth of the monetary base was controlled.

Do banks register payment facilities in the Samat system?

Mr. Mehdizadeh: All bank facilities must be registered in the SAMAT system and banks are required to do this.

Payment facility is the creation of liquidity, but the point is that if it is done through the creation of supply, it can be an anti-inflationary policy.

If all facilities are registered in the Samat system, what is the reason for not publishing the full list of the names of large facilities?

Mr. Mehdizadeh: The delay in announcing the names has nothing to do with the Samat system and the discussion is completely covered and other issues may have led to this delay.

What is the inflation rate in the government’s anti-inflation package?

The fact is that this year the inflation predicted in the economy is exogenous and I don’t want to announce the target inflation rate, but it is the predicted rate.