In a joint meeting of the economy minister and the head of central bank was announced a package of anti-recession efforts to improve the business environment by increasing demand. An important part of this package focuses on industries that produce final products, like housing and automotive.
The most important part of the package is required reserve rate cut, during the meeting it was announced that the reserve requirements rate will reduce for banks with excess reserves from 13% to 10%. In general, the decision increases the resources of the banks and can lead to the reduction of interbank rates.
Interesting point of this meeting for automakers is that the central bank pledged to grant loans at a rate of 16% to car buyers. Also in this package part of the resources will be allocated to the modernization and development of agricultural infrastructure in Iran. The most important facilities that the central bank can provide is the loans for replacement and modernization of machinery and agricultural equipment under the supervision of the Ministry of Agriculture.
Also in the meeting, central bank governor pointed to the exchange rate unification policy and this will happen until 6 month after the implementation of sanction relief. Because of the petrochemical feedstock is pricing by the official exchange rates and their products is pricing by free market exchange rate, their profit margin will reduce.
In the meeting government spokesman announced that until end of the Iranian year government decided to allocate 35 billion to the construction projects, this decision makes the cement and steel producers reduce their inventory stock and gives them a partial growth in their operation.
One of the important things to be mentioned by the Minister of Economy that is the decision about the paying debts to the government’s contractors. According to unofficial reports government’s debt to the contractors and banks estimated 160 billion Tomans and in the package 16,000 billion Tomans government bonds will issuing for repayment of debts and the cash in for contractors will reduce the liquidity risk of such this companies, specially contractors of power ministry, like MAPNA. But due to market depth issuing this volume of bonds looks optimistic and it seems government can sell just 10,000 billion Tomans bonds.
In the final conclusion, the most important achievement of this proposed package for stock market will be the opportunity for the selling inventory stock. Also the reserve requirements rate cut makes the financing easier for companies and it facilitates investing for the companies.