Banking on Private Enterprise

EghtesadOnline: Bypassing US economic sanctions is the function of a robust private sector and the banking sector will step in to empower private companies, said the CEO of state-owned Bank Melli Iran.

News ID: ۷۴۸۰۴۹

04 August 2019

“If we want to evade the [US] sanctions, the private sector can do it best. It is indeed the banks’ mission to finance manufactures and exporting companies and offer them strong support,” the BMI website quoted Mohammadreza Hossienzadeh as saying.

Regarding national priorities, he pointed to the need to lift local production, which by nature leads to economic growth, create jobs and reduce inflation, according to Financial Tribune.

“Lenders should do all they can to deliver and address these priorities.”

Official data last week put the annual inflation rate at 48% for goods and services y/y as measured by the Consumer Price Index. In addition, the unemployment rate, the proportion of jobless population 10 years and above, was 10.8% in the first quarter of the current fiscal year that stared in March.

The International Monetary Fund has forecast a deeper recession this year, projecting real GDP growth of -6% in 2019 after a contraction of 3.9% the year before.

Remaining in Business

American sanctions have led to rising production costs over the past year, which in turn have given rise to the growing need for working capital, creating problems for manufactures trying hard to remain afloat and not down their shutters.

New economic restrictions that hit the economy hard  last year were imposed after the US president, Donald Trump, pulled out of the historic nuclear deal Iran signed with the six world powers in 2015.

The Trump White House has said it wants to undermine Iran’s economy and overseas banking tiers and bring its   “oil exports to zero”.

In two rounds of sanctions, the US first banned Iran from dealing in the greenback and restricted its trade in precious metals in August 2018 as part of a larger plot that aims to cut off Tehran from the international financial system. The second tranche of US sanctions on Iran's oil and gas sector came into effect last November.

To help mitigate the harmful effects of the US belligerence and unmasked animosity, officials are focusing on boosting the role of private enterprise, particularly manufactures.

In line with this goal and efforts to boost domestic production and curb recession, the Central Bank of Iran has a plan it calls “productive working capital” to   help procure funds for struggling manufacturing units.

CBI Governor Abdolnasser Hemmati has said that the new plan is designed to meet the capital needs of the production chain and prevent scarce CBI resources from going into non-productive activities.

The regulator announced in July that banks will help SMEs with 300 trillion rials ($2.3 billion) in loans for  working capital.

Furthermore, of the 7,737 trillion rials ($60 billion) loans paid to companies in the last fiscal year (ended March), 4,319 trillion rials ($33.3 billion) was allocated to raise the working capital of businesses. This accounted for 55.8% of all loans paid during the 12-month period.

Highlight: To help allay the harmful effects of US belligerence and unvarnished animosity, officials in Tehran are concentrating more on boosting the role of private enterprise, especially manufactures