There are lots of different quotes about the amount of Iran’s blocked money outside the country. Without considering the exact amount of this blocked money, the government should have a plan for inflows of money to the country after relief of sanctions by foreigners and by unblocking of this money. If government wants to inject this blocked money to the market which is not favorable for him, market will have a huge amount of inflows and in result, it can appreciate Rial and will result on rising import in compare with domestic goods and it will have effect on rising inflation. In addition, with recent gloomy weather in international oil market price, this is not also favorable for the government. So this scenario is less likely to happen.
In an April 21 interview with CCTV America, Seif, The central bank of Iran governor, said Iran would cut inflation to single digits within the next two years. That means no such plan will be on CBI’s agenda until inflation is further tamed, an elusive target.
Other Possible scenario which is more likely for the government, is to conduct inflows of money to the country through investing in infrastructure and develop technology in various sectors.
Farhad Nili, head of the Monetary and Banking Research Institute, noted on August 2015 that sanctions have left Iran with œcompulsory savings abroad, an opportunity that he said must be seized in a best way.
The Central Bank of Iran (CBI) has in the past 18 months focused on curbing inflation, which is an effective factor on the rial’s parity rate against the US dollar as the dominant reserve currency. Inflation, which once stood at 40%, reached 15.5% in the 12 months ending April 2015, a great achievement for the moderate administration that took power with an agenda to recover the economy. Late in April, the regulator eventually decided to lower interest rates, putting a 20% cap for deposit rates (down from 22%) and 24% limit for lending rates (down from 28%). Observers believe the third step the CBI may take is a decision to unify the dual foreign exchange rates, a policy the administration has been sitting on since mid-2013.
Some economists believe a unified system could be a boon for Irans business environment, as it would reduce corruption and rent-seeking, a phenomenon widely believed to be a major setback for the struggling economy. In April, Tahmasb Mazaheri, a former CBI governor, told Nasim Online that the administration should not waste time by putting off the unification plan for the post-sanctions era.
Mehdi Barakchian, an economist within the administration, favors the Chinese central bank idea to block foreign revenues the government is earning from entering the domestic market. In a recent interview with Tejarat Farda magazine, Barakchian discussed how for the past two decades the Peoples Bank of China has been purchasing billions of dollars in foreign funds to avoid a strong yuan, a move that has frequently been met by opposition from US authorities.
If the CBI applies the same policy as China did, the rial will not appreciate very much and therefore imports would only increase reasonably. Instead, the government has the opportunity to invest in regional countries, infrastructure and import of technology, a policy the Rouhani administration has already started to pursue. It could be a defendable decision if the CBI chooses to shift a major part of the multi-billion dollar revenue to external markets. The strategy could meanwhile boost Iran’s foreign policy as it would help increase the Islamic Republic’s share in other investment markets, the same path China, a model economy for Iran, has been following.