Contraction policy suffocated Iran’s capital market
Tehran, Iran, August 12
By Mehdi Sepahvand –- Trend:
Over the past four years, Iran’s capital market has not been able to grow as it must have due to the government’s contraction policy, according to Mahmoud Reza Khajeh Nasiri, CEO of Arman Investment Bank and former markets inspector at Tehran Exchange Market (TSE).
The government’s policy to rein in inflation, as well as a general industrial downturn and high bank deposit interests have all kept the capital market in Iran away from its real stature, Dr. Khajeh Nasiri told Trend August 12.
Right or wrong, the contraction policy needs to be abandoned if the incoming administration in Tehran wants the capital market to see some change, he said.
When he took office in his first term in 2013, President Hassan Rouhani faced an inflation rate greater than 40 percent. However, in early 2016, he had managed to lower it to about 7 percent.
Khajeh Nasiri then added that another factor that can also improve the status of the capital market in Iran is foreign investment.
“The biggest possible impact of the JCPOA [Iran’s 2015 nuclear deal with world powers] on the capital market could come through foreign investment,” he said. “If foreign investment is made, the costs in the industrial sector will decline, which will result in greater cash flow and profitability of companies, thus helping the capital market grow.”
Iran reached the deal with world powers in order to put an end to much economic affliction that had resulted from harsh sanctions. The sanctions were lifted following the deal in early 2016. However, foreign companies and banks were reluctant to approach Iran in the first year after the JCPOA implementation, fearing punishment especially by the US Treasury.
Notwithstanding this all, President Rouhani has managed to strike some very big deals with world giants, hoping that they would act as ice-breakers and lure more investment. Among these deals are a $5 billion deal with Total to develop a gas field in southern Iran, deals to purchase large numbers of airplanes from Boeing, Airbus, and ATR, and car manufacturing deals with PSA Peugeot, Citroen, etc.