Iran's Parliament urged to help check inflation

IranMania:

Minister of Economic Affairs and Finance Davood Danesh-Jafari said here on Tuesday that the new government will study ways to reduce the executive authorities of Central Bank of Iran (CBI) and Central Insurance Company of Iran, stressing that the two key bodies must be given greater supervisory roles, reported ISNA.

Speaking at the 16th Seminar on Islamic Banking, the minister said that the two organizations have to be involved more in policy-making than executive operations. READ MORE

He added that the government and the Parliament must join hands to control inflation and reduce bank rates, noting that such policies cannot be enforced without close cooperation between the government and the Parliament.

"One of the most effective ways of reducing bank rates is to bring inflation under control," he said, adding that Iran has one of the region's highest inflation rates.

He further noted that government organizations' debts to the banking system are also to blame for the high inflation rate, saying the debts must not grow any larger under the Ahmadinejad administration.

The minister said the banking system's administrative costs have to be cut down as part of efforts to reduce bank rates.

Experts say excessive withdrawals from Foreign Exchange Reserve Fund and the CBI's failure to convert the withdrawn hard currency into rial have led to an increase in liquidity growth and a subsequent rise in inflation rate.

At a time when oil revenues are at all-time high, experts say the Central Bank of Iran (CBI) is unable to convert more than $22 bln into the national currency per annum, adding that the alarming liquidity and inflation rates will worsen if the bank injects more hard currency into the market.

Mohammad Kordbachcheh, Management and Planning Organization director general for macroeconomic affairs, said high liquidity growth has posed a serious threat to the national economy, stressing that every one bln dollars that the Central Bank of Iran fails to convert into the national currency leads to an increase of five % in liquidity and three % in inflation.