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Despite decline in inflation rate in Iran, its level is still high: expert

Business Materials 1 October 2009 15:41 (UTC +04:00)
Inflation in Iran has slowed down to the level of one percent, although the dynamics of growth of prices on the domestic market is the highest in the Caspian region. "The rate of inflation is affected by the rate of growth of money supply (M1) and liquidity (M2), but the inflation rate by any standard is still quite high," Professor at U.S. Northeastern University Kamran Dadkhah said.
Despite decline in inflation rate in Iran, its level is still high: expert

Azerbaijan, Baku, September 28 / Trend , T.Konyayeva /

Inflation in Iran has slowed down to the level of one percent, although the dynamics of growth of prices on the domestic market is the highest in the Caspian region. "The rate of inflation is affected by the rate of growth of money supply (M1) and liquidity (M2), but the inflation rate by any standard is still quite high," Professor at U.S. Northeastern University Kamran Dadkhah said.

Inflation rate in Iran in July made up 21.5 percent compared to 22.5 percent in June, IRNA state news agency reported. Last year, the inflation in the country reached 17.1 percent compared to 8.9 percent two years earlier.

The main economic problem of Iran is today the inflation rate, which - the highest for the country in the current decade, which led to a significant drop in the value of Iranian rial in the past few years.

According to Dadkhah, the reasons for the slowdown in the growth of money supply seem to have been lower oil revenues. "So the government cannot deposit a large amount of dollars in Bank Markazi and immediately ask for its equivalent in rials," Iranian expert who lives in the USA told Trend via e-mail.

The growth of money supply (M1 and M2) was caused by the global financial and economic crisis, which reduced the amount of international loans to Iran's affiliated companies, he said.

Year

Rate of growth of M1

Rate of growth of M2 (liquidity)

2006

25,8

34,3

2007

30,4

39,4

2008

29,2

27,7

2009

27,3

15,9

(source: U.S. Northeastern University)

Some economists believe that high inflation in Iran was caused by wrong economic policies of current President Mahmoud Ahmadinejad, who lends to SMEs at low interest rates, subsidizes population and increasingly invests public funds in the industrial sector. Revenues from oil exports ale also distributed wrongly, according to experts.

Iran is the second largest exporter of oil among OPEC countries. According to BP, as of January 1, 2009 the proven reserves of oil in Iran amounted to 137.6 billion barrels. Oil production in the country in 2008 exceeded 215 million tons with domestic consumption of more than 86 million tons.

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