Friday, January 20, 2006

Iran money supply 'growing too fast' - Trade Arabia

Iran's money supply is growing too fast, impeding efforts to curb inflation and threatening future economic growth, Central Bank Governor Ebrahim Sheibani was quoted as saying. Speaking at a banking convention, Sheibani said growth in the M2 broad money supply was on track for an annual rate of 35 to 36 per cent by the end of the current fiscal year on March 20. That would be up from 30.2 per cent in the previous fiscal year.

"The liquidity growth rate is dangerous for the national economy," the official Irna news agency quoted him as saying.

Sheibani blamed high liquidity growth on a massive influx of petrodollars due to high oil prices, and on lax fiscal discipline. The government funded current spending on salaries and subsidies by withdrawing billions of dollars from a rainy-day fund designed to store surplus oil revenues for leaner years.
. . .
Central Bank officials have recently complained that the bank now has to seek approval from parliament in order to issue local bonds known as Participation Papers - its principle tool for soaking up excess liquidity.

Emphasis added.

I like the current arrangement. Inflation can lead to revolution.



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