The effectiveness of economic reforms requires the cooperation of the three powers/ reducing the budget deficit requires the simultaneous interaction of the government and the parliament

According to the economic reporter of Fars News Agency, the issue of temporary jumps in the price of currency is one of the constant problems of the country’s economy, although governments take measures to stabilize and control it, but due to numerous economic issues, including the increase in liquidity, this issue is still fundamentally solved. has not been

Since September of this year and after the unrest and riots, the currency market faced an increase in prices and in the past weeks we also witnessed a jump in the exchange rate. goes

We have had a conversation with Mohammad Hassan Sabouri Deilmi, an economic expert, about the fluctuations of the currency market and the government’s measures to curb the price jump, which you will read below.

* The relationship between liquidity growth and currency price increase

Fars: The increase in the exchange rate and sudden and temporary jumps is one of the problems of the country’s economy, and of course it is caused by the sanctions and also internal factors that we face from time to time. It reached one thousand tomans, but with the implementation of government policies, including the change of the head of the Central Bank and the implementation of some new policies, we saw a decrease in the price of the currency, and now the price of the currency is almost at a relative stability, but this issue has always been the problem of the country’s economy. In your opinion, what are the general reasons for the increase in the currency and the recent increase in the price of the currency?

Sabouri Dilami: Regarding the causes of the increase in the exchange rate, there are primarily a series of fundamental issues that cause the exchange rate to increase, including the disproportionate increase in liquidity during these years and the continuation of this trend of increasing liquidity. An increase in liquidity causes an increase in the price of goods in the market, and the price of currency also increases as an asset.

According to various economic theories, in the long run, each one percent increase in liquidity will lead to one percent increase in inflation and one percent increase in the exchange rate, and this is the truth that the country’s economy has been facing for years.

Although this relationship may be stopped at some point of time by using foreign exchange reserves and suppressing prices, but experience has shown that this behavior has been implemented in the long term and has an example in Iran’s economy.

* Necessity of adjusting the exchange rate according to the difference between domestic and foreign inflation

Fars: How do you evaluate the exchange rate stabilization policy?

Sabouri Dilami: The country’s currency system is managed as a float, and therefore the currency price must be adjusted every year to the extent of the difference between domestic and foreign inflation. If this correction is not carried out, there will be increased expectations about the exchange rate, and in other words, the brokers will expect an increase in the exchange rate in the market.

In this case, any small change in the exchange rate of the market sends this signal to the foreign exchange market participants that the government’s foreign exchange reserves have probably decreased or the monetary policy maker’s access to foreign exchange reserves has been limited in some way, and this problem has caused the foreign exchange market to face a shortage. In this situation, it is possible to invade the currency market, and as a result, successive increases in this market are not far from expected, in other words, in this situation, which is mainly related to the short-term period, the expectations of the increase in the exchange rate as The reason for the increase in the presence of activists in the market will be the increase in the exchange rate.

With the increase in the exchange rate and the formation of inflationary expectations and the creation of uncertain conditions, the holders of liquidity to maintain the value of their assets and liquidity to various markets such as currency markets and precious metals and coins, cars, land and housing and even some essential consumer goods such as: rice and Oil etc. have been imported and with the increase in demand in these sectors, we will suddenly see an increase in prices.

* How did the increase in order registration and the growth of false demand take place after currency inflation/inflationary expectations?

On the other hand, when the signal of exchange rate increase is transmitted to the markets, the producers also put the supply of raw materials needed in the coming periods and complete the capacity of their raw material warehouses as much as possible and increase the demand.

Experience has shown that these behaviors caused by creating excitement and excitement in the foreign exchange market led to an increase in the registration of orders and, as a result, created false demand in the domestic and foreign markets, and sometimes even affected the price of goods in foreign markets.

Of course, it is also necessary to mention that, in addition to economic factors such as liquidity and inflation, which have had an increasing effect on the exchange rate in recent months, part of the recent inflationary expectations arose due to the recent conditions and inflammations and riots, so the psychological burden of expectations has been created. It aggravated the swelling.

* A more active policymaker should be present in the currency market/transparency controls inflammations

Fars: The foreign exchange demand for imports, including the import of raw materials, is supplied through semi-currency, whose price is much lower than the free market currency, and today it has a stabilization policy of 28,500 tomans, but for what reason, the price of some goods continues to rise. Are?

Sabouri Dilami: Yes, the main price of the currency for import is provided through the Nima system, and the producer and importer buys the currency they need at half the price of the central bank system and does not buy the currency from the open market at recent prices. Therefore, in my opinion, in the current situation, in order to reduce the inflammation of the currency market, the monetary policy maker should be much more active in the currency market and control the inflammation with more information and transparency. In this situation, it will be very effective and efficient to induce a calm atmosphere in the society in such a way that market participants will notice the stability and security in the market.

TheAlthough the fundamental economic issues have been effective in increasing the currency price and the currency price also increased to some extent, but as I mentioned, part of the recent currency inflation was caused by the riots and mischief of hostile countries, which it is necessary for the monetary policymaker to neutralize them with tact. By entering the market and playing a more effective role while maintaining peace in the market, their designs will fail.

* Riots and creating an atmosphere of insecurity increased the demand for cash conversion

Fars: You say that the influential economic factors should have had an effect on the increase in the price of the currency and the price of the currency should have increased to some extent, but you also mentioned the effect of the unrest on the currency market, which to some extent had an effect on the increase in the price of the currency, how did these inflammations And the insecurities caused an increase in the price of currency?

Sabouri Dilami: A series of events occurred in the country in recent months, and as a result, many negative media tried to portray the atmosphere of insecurity. Put the conversion of available liquidity on the agenda.

In such a case, a topic like the researcher’s own expectations is objectified; Self-fulfilling expectations are a type of expectations in which a person performs behaviors and after the formation of those behaviors, the expectations will be automatically fulfilled, for example, suppose some people expect that the exchange rate will increase in the future. Therefore, they will rush to the markets to buy currency, and accordingly, the demand for currency in the market will increase. Although there may not be a specific reason for the formation of these expectations, at the end of the chain we will see that the exchange rate has increased anyway.

When such a process has been formed in the economic environment of the country, due to these false expectations, some owners of liquidity have started buying in the currency market (in the form of bills) and this behavior has caused an increase in the price of currency in the market. Of course, it is necessary to re-emphasize that based on the economic components and rules, it is necessary to increase the price of the currency to some extent, but the other part of the price increase is due to the formation of expectations due to the events and conflicts that have involved the country.

* Why the limited currency exchange of banknotes affects the entire currency exchange of the country

Fars: What is the effect of currency notes on the entire foreign exchange of the country?

Sabouri Dilmi: The banknote currency that is exchanged in the market constitutes a very small percentage of the country’s currency market, and the major part of the country’s currency is exchanged in the same currency system of the Central Bank, therefore, as a rule, the currency of the banknote should not be the basis for calculating prices at all, but in the market We have seen that with the increase in the currency price in the free market, the prices of other goods also undergo changes and increase. This issue stems from the same inflation expectations that I mentioned.

* The policymaker in currency fluctuations should signal the absence of currency shortage by entering the market

Fars: As you mentioned, imports are carried out with half currency and the banknote currency that is exchanged in the market is a very small percentage of the country’s currency market, but nevertheless, the increase in the price of the banknote affects the increase in the price of all goods. The government’s duty in What is the opposite of this?

Sabouri Dilami: In such a situation, the monetary policy maker should calm the market atmosphere by informing. As the atmosphere calms down and the market exits, the excitement of going to buy currency notes will decrease. In this situation, it is appropriate for the monetary policy maker to intervene in the market in a more active manner, and with his effective intervention in the market, to convey this signal to the market participants that there is no shortage of currency resources.

Therefore, the task and role of the monetary policy maker in active conditions is very important for market management and proper information, and vice versa The financial sector and the government’s financial policies in general should be changed in such a way that financial indisciplines and budget deficits will decrease in the future and the pressure on the monetary policy maker will gradually decrease.

* Reducing the budget deficit requires the simultaneous cooperation of the government and the parliament

Fars: Why have there never been fundamental reforms in the country’s economy, and we have been faced with problems such as a sudden increase in the exchange rate from time to time? What is the main solution to solve such problems?

Sabouri Dilami: I have already said in previous interviews that it is necessary to put a series of basic economic reforms on the agenda. Unfortunately, regarding the implementation of these reforms, we need serious determination and the support of all policy-making and executive elements in the government and on the other hand, the people. The fact that sometimes decisions are made for these reforms but these decisions are not fully implemented will leave more destructive effects and if the reforms are not going to be fully implemented, it is better if they are not on the agenda from the beginning.

For example, regarding the budget, when we decide to reduce the budget deficit, the government and the parliament should take the necessary measures with the necessary cooperation to reduce the budget deficit, and this issue should be placed on the agenda as a general principle. It is in this situation that it can be expected that the views will change from regional to national and move step by step towards reforming the budget structures.

* Creating economic attacks after the fundamental reforms of the country’s economic system

Sabouri Dilmi: Whenever fundamental reforms aimed at reforming the structure of the economic system are put on the agenda, we are attacked and hostile countries take measures against us, it seems that the situation is followed in such a way and a group plans to never in the economy. The country should not seek fundamental reforms.

For example, after the targeted implementation of the subsidies, heavy sanctions against Iran were started and also after the reform and removal of the 4200 Toman currency for the import of basic goods in May this year, new problems arose for us and we witnessed new riots and events in the country. It caused a lot of costs for the country.

* Enemies’ tactics to attack Iran’s development process

Sabouri Dilami: As it is certain, Iran’s development process is not pleasant for the enemies and they want to delay the development process and attack it with various tactics. In order to solve the country’s economic problems and to create strength and prevent economic vulnerability, it is necessary to form a consensus and a unified discourse between the policy makers and the people so that we can overcome the hurdles that have plagued the country for years.

It is obvious that the success of these fundamental reforms requires the support and trust of the people in the economic policy makers, and with the results of these reforms, we can hope to see a stable level of inflation and economic growth in the country in the future.

Faris: Thank you for your time for this interview.

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