Sunday, January 02, 2005

Commerce Minister Mohammad Shariatmadari on inflation

IranMania News: "Reducing banking rates ups economic vibrancy

Sunday, January 02, 2005 - ©2004 IranMania.com
LONDON, Jan 2 (IranMania) - An MP from Tehran said that with reducing banking interest and profit rates can spur growth in the economy.

Mohammad Koshchehreh, also the Deputy Majlis Economic Committee Chairman, said that the level at which growth can be created depends on the capabilities of the monetary policy, banking management and prudently using the resources at their disposal. On a proposed bill for `reducing the double digit banking profit rates`

put fort by the Majlis` Research Center, he told IRNA that although economic stability and controlling inflation are well-known goals, "but the tools to attain them changes depending on prevailing conditions."

"Harnessing inflation is generally among the primary goals of governments at any given time," he added. To reduce unemployment, Iran, with a 70 million-strong market should have a high level of production of goods. "The production levels have not kept pace commensurate with the potentials of such a vast market," he added.

"Obstacles have prevented realization of the potentials of the market leading to adverse effects on the employment front." Another problem the economy lies in shortage of `liquidity`.

To increase production need financial, monetary and credit sources, he added. Although almost all experts agree that interest rates are among the crucial determinants of economic vibrancy, the question remains on wisdom of lowering interest rates, when in the prevailing conditions, the rates in the non-official markets are higher than the official ones, the MP underlined.

Commerce Minister Mohammad Shariatmadari said here Monday that one of the most important levers to ease and curb inflation in Iran is to control liquidity. Talking to IRNA at the end of his one-day tour of southern Iranian cities, Shariatmadari said if economic projects and programs are targeted at the goal, one can be hopeful of lowering the rate of inflation in future.

Inflation rate in Iran stands at 13.8%, well below the 16.7% target set by the Third Five-Year Economic Development Plan`s (2000-05) law. Iran`s economy is state-run in nature, which is mainly the core of inflation in the country.

Policies of the state have been oriented towards privatization and downsizing government through a series of contraction economic mechanisms. Some experts believe the strategies to cut government expenditures have not been fruitful and on the contrary the state cost have been on the increase.

Meanwhile, in a sign of improved performance by the Iranian economy, the British rating agency `Fitch` in December lowered the risk rating on Iran long-term foreign obligations, government`s short-term loans and credit ceilings from B+ to BB- in a report released last week. Central Bank of Iran (CBI) said the change in rating means that the Fitch has lowered by one notch its credit risk assessment on Iran."

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