Vally-ollah Seif, chairman of Irans Central Bank, who participated in the conference of strategies for the economic enhancements, claimed that the rate of economic growth in the final quarter of last year was 0.6 percent and said: This is the lower most rate we encountered in the last three years and it is expected to continue its decline in the present year. We are going through a transition phase and as such, we should try to stimulate and prepare the economy for the period coming after the implementation of JCPA.
On the issue of central banks policies, he explained: Our emphasis is on the monetary and credit regulations; we have devised two methods for the elimination of the financial crisis and to preserve the downturn of interest rate; these methods are first lowering the threshold of permitted savings and second bringing the central bank inside the intra-banks market.
He continued: Based on current regulations, the fixed interest rate for bank savings is 13 percent; but our plan is to turn it into an unfixed and variant rate in the commercial banks, fluctuating between 10 to 13 percent. The indicated rate is to guarantee the uniform and legal practice of the banks and we are firm on the constant monitoring and revision of this rate.
He claimed that this strategy would channel central banks liquidity towards other banking institutions and would result in much lower costs for supporting and facilitating them.
Seif also mentioned the intra-bank market and said: Solving bottlenecks and directing the trend of current interest towards our ideal range are in our agenda. Although the inflation rate has dropped to 15 percent, this had not influenced the interest rates significantly; this is a major problem and its roots go back to a mixture of illegal systems, governments debts to the banking system and some other factors.
Promising a certain drop in interest rates, he explained: We are pushing forward for a gradual drop in the interest rate and uprooting of irrelevant provisions. Also, central bank would no longer ignore the misconduct of other banks; exemplary ones would be recommended and those charged with transgression would have to answer before the disciplinary committee.
Seif also gave information on a plan for financial support of the producers and offering credit options for the consumers. He continued: The financial support is based on the commission of the council for money and credit and is granted through pre-purchase of debts; dated documents of this purchase are administered in smaller banks, then they are submitted to the central bank. Central bank grants these credits with a 14-percent rate for the smaller banks and these banks in turn transfer them to the producers those registered in the ministry of industries and mining- and would ask for a 16-percent interest rate.
He also talked about the governments strategy for the auto-makers and said: Consumers can receive up to 80 percent -25 million Tomans- of the credits from authorized agencies; this is a 7-year, 16-percent package. The same process for the banks and producers, here is used for the auto-makers and buyers.
About the subsidies on the purchase of durable goods, Seif explained: For this purpose, we have provided credit cards. All the banks are licensed to distribute them among the employees of the government or private sector or anyone who has a fixed income. These cards can pay for domestic goods. The maximum credit is 10 millions and its interest rates for the individuals and banks are 12 and 10 percent, respectively.
Then he turned his attention towards stimulating construction activities, saying: Some projects for the reformation of old and run-down districts are in order with a collaboration between the central bank and housing ministry. Also, considering the second waver on the budget plan, oil ministry would receive some supports in exchange for saving energy.
It should be mentioned that there are some concerns regarding the possible inflation caused by these strategies. Seifs response was: Since these credits and options are specifically directed towards buying stored and domestic goods, a rise in inflation would be improbable. But it is also a fact that central bank has to keep a close watch on the liquidity and credit parameters.
In response to a question about the total amount of these credits and options, Seif said: Proportional to the inflation, some resources would be injected into the market and the effort is to keep the interest inside an acceptable range.
Then he talked about the enhancement tools for the export and said: 200 million dollars would be granted to the Export Bank so it can support technical-technological services, especially current contractors inside Iraq; it also will use these resources for the purpose of endorsing domestic participants in international tenders.
Taieb-nia, also present in the conference, said: 20 percents of banking resources would be used to support purchase of domestic goods.
To answer a question regarding the expected decrease in prices, Noubakht said: This decrease in the final costs is due to the subsidies for the industrial and agricultural sectors and we are confident about the drop in prices. The important point is to not forget the various possibilities after the sanctions and to base our expectations on them.
Next, Seif talked about the move towards a fixed exchange rate and explained: Right now we can equalize the varied rates; but there is still the pressing need for reinforcement of intra-banks channels and a more open international situation. All the arrangements are in place and fixed rates would be possible in the span of six months after the implementation of join action plan, in the first half of next year.
Then Taieb-nia focused on the estimated inflation rate in the governments package for economic policies and said: There is some evidence showing that the declining trend of this rate would keep on. This year we are going to have mono-digit comparable inflation which of course is not a surprise, but a result of previous policies.
He emphasized: Government determines all its policies based on a single rule and that is resistive economy.
Noubakht likened Irans economy to a patient suffering from a 40? fever and a negative 6.8-percent anemia; he emphasized that this patient needs immediate care and the prescribed medications should vary based on its condition. Up until now, the prescribed policies were successful and they are monitored closely.
Taieb-nia claimed that this patient is cured and added: It again got infected with a foreign virus (drop in oil price), but the simple cure for common cold is enough to treat it.
Seif claimed that 1.4 billion dollars of oil resources have been remitted in India and added: It was due to a problematic communication channel; but we finally cashed it and after deducting the portion dedicated to the ministry and development fund, the remaining sum would be delivered to the governments treasury.
He also explained that illegal institutions have limited capabilities which are not worrisome and continued: Directing new resources would help us to approach our goal of decreasing the interest rate.
In response to the unofficial news of discord between economic authorities, Taieb-nia explained: There is no serious disagreement between me, Mr. Seif and Mr. Noubakht.
He added: Decrease in inflation does not mean a general drop in prices and I as an economist not just the minister of economy- advise our people to not hesitate in buying essential goods.
Chairman of general management and planning organization said: Governments plans are based on resistive economy and they are not yet implemented fully and comprehensively.