Banking System Needs Reform
Although it seems normal that when inflation decreases, so does interest rate, but so far reality in Iran has been quite different.
“With a great effort, today interbank rate has been reduced to 18.5% from 29.5% in June”, announces Dr. Tayyebnia, Minister of Economic Affairs and Finance of Iran.
For the next Iranian year, inflation is predicted to reach 11.3% from 15.1%. On the other hand, long-term deposits at 20% interest make it hard to see a quick solution.
At least all new accounts from this week will enjoy a lower interest rate and Central Bank is determined to impose tight control
Government’s debt: half of GDP
Finally Iran Government’s debt amount became clear: ~$180 billion, i.e. 43% of GDP in 2014.
Its debt to banks is $24 billion, to Social Security and Pension Fund $19 billion, to its contractors and other private entities $18 billion and about $66 billion to other pension funds.
$53billion debt of National Oil Company needs also to be added.
President Rohani says the Government will liquidate its debt within the next two years, i.e. by March 2018, mainly through selling bonds. Three major instruments are: Sukuk Bonds, Liquidity Bonds and Islamic Treasury Bonds.
Prices at Governmental Exchange Rate, Sources: Ministry of Economic Affairs and CBI reports
Going back and forth: for how long?
Ten years ago, when “reallocating subsidies Plan” were put in action, the Government cut the subsidies in fuels.
All gas stations were equipped with digital card-readers in order to calculate fuel price, according to car-model.
Lower-model cars were also given a “gas-card” with a certain quota for a cheaper price gas fuel, upper-models had to purchase it at a higher price.
By and by cheaper price became more expensive, and quota reduced. Today there is a one fixed price of 1000 Tomans (€0.25), already 10 times more than 10 years ago.
All the investment to equip gas stations to card-readers and making magnetic cards, today will serve only to fill your tank.
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