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Iran’s Money and Credit Council mulls increasing bank interest rates

Business Materials 21 October 2013 19:05 (UTC +04:00)

Azerbaijan, Baku, Oct.21/ Trend, F. Karimov/

The Money and Credit Council of Iran is studying the issue of increasing bank interest rates, the Mehr News Agency quoted member of the council Mohammad Nahavandian as saying.

It is hoped that the council would come to a conclusion in this regard, he said.

The country is facing an inflationary recession. So, interest rates cannot be changed swiftly. However, the government is determined to change the rates, Nahavandian explained.

In August, central bank governor Valiollah Seif said that the bank interest rate should be set proportional to the inflation rate, the Fars News Agency reported.

He added that interest rates should be revised, so that it should be less than the inflation rate. He further said that the free market exchange rate of 32,000 rials per U.S. dollar is not abnormal.

Foreign currency exchange rates should be adjusted each year based on the inflation rate, he said.

The real interest rate for deposits in Iran is the lowest in the world by negative 13 per cent, Iranian Eghtesadonline portal reported.

The real interest rate is the lending interest rate adjusted for inflation as measured by the GDP deflator.

According to the report, Iran's inflation rate in the past year was 31 per cent, while deposit interest rate officially had been set at 18 percent.

The report compared figures in Iran with countries including Pakistan, Venezuela and Saudi Arabia, etc, saying Iran stands at the latest stage in term of real interest rate in the world.

The Central Bank has confirmed that the national economy contracted by 5.4 percent in the past Iranian calendar year, which ended on March 20, Iranian economy minister Ali Tayyebnia has said.

According to Iran's statistical center, the country's economy contracted by 5.4 percent in the past Iranian calendar year, ISNA quoted Iranian president's deputy for planning Mohammad-Baqer Nobakht as saying.

The Central Bank has put the inflation rate at 44 percent. This shows recession in the country, Nobakht said.

A low economic growth rate is currently the main challenge in the national economy, ISNA quoted Tayyebnia as saying.

Tayyebnia referred to high unemployment as another serious concern.

For the time being, some 3.5 people are jobless in the country, he said, adding that the figure will soar to 8.5 million, because a large number of educated youth will be graduated from universities soon and will seek jobs.

The ministry will focus on improving living standards through curbing inflation and encouraging businesses, he stated.

The Iranian administration and the parliament have agreed to issue 50 trillion rials (about $2 billion billion based on official rate of 24,800 rials per each USD) worth of bonds in the current Iranian year to finance development projects, IRIB reported.

The current Iranian year began on March 21, 2013.

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