Money Supply Skyrocketing

EghtesadOnline: Liquidity in Iran crossed 22,623 trillion rials ($165 billion, calculated as per 137,000 rials to a dollar) at the end of the third Iranian quarter (Dec 21), the Central Bank of Iran reported.

News ID: ۷۴۹۶۸۴

15 February 2020

The figure shows 28.2% growth compared to the corresponding month last year. Liquidity grew 20.2% since of the end of last fiscal year in March 2019, Financial Tribune reported.

While the monetary base has remained unchanged compared to the earlier month, juxtaposing monthly CBI reports reveals a steady increase in the unprecedented pace of liquidity growth.

CBI had stopped publishing monthly data on money supply and other economic indices in August 2019 before publishing several monthly reports in separate reports on Thursday.

In the August report, the bank reported 25.1% growth in liquidity by the end of third fiscal month to June 21 compared to the corresponding month last year.

The figure rose to 26.3% point-to-point a month later and has been increasing at a regular pace ever since, raising concerns that the ballooning liquidity will shock financial markets and inflate prices.

CBI’s report includes the entire stock of money circulating in the economy plus quasi money.

Accordingly, the share of money in the financial system was 3,634.8 trillion rials ($26.5 billion) by the end of ninth calendar month, indicating 48.6% rise year-on-year and 27% growth compared to the end of the last fiscal year.

Additionally, the value of quasi-money amounted to 18,988.3 trillion rials ($138.5 billion) to post 24.9% growth annually and 18.9% growth in the nine-month period.

Quasi money, also called near-money, is highly liquid assets other than cash that can be quickly exchanged for cash. Examples are bank certificates of deposit and treasury bills.

The total value of banknotes and coins in circulation was 527.9 trillion rials ($3.8 billion), indicating 16% hike on year-on-year basis and 3.6% decline compared to data for the end of last year.

Decline in cash volume among the people could be partly explained by CBI programs to expand electronic banking system platforms.

A CBI press release recently spoke of considerable growth in operations of key electronic banking platforms during the first half (March-Sept. 2019) of the current fiscal year.

Assets

Total assets in the banking system, including foreign assets plus government and non-government debt to lenders, reached 49,765.3 trillion rials ($363 billion) by the end of the month to Dec.21.

This is 21.7% and 14.3% higher compared to the corresponding period last year and last yearend, respectively.

Foreign assets owned by banks and credit institutions amounted to 10,341.5 trillion rials ($75.4 billion), up 17.4% YOY and 12.8% higher compared to the end of the last fiscal year.

With regard to CBI’s assets, data showed 6.7% annual increase in foreign assets by the end of the ninth calendar month. The bank had 4,945.1 trillion rials ($36 billion) in assets overseas, also indicating a 6.3 growth compared to the last month of the previous year.

The value of banknotes and coins held as CBI assets was 22.7 trillion rials in the same month, declining drastically by 53.1% compared to the same month last year and rising 5.1% compared to the end of last year.

By Dec. 21, commercial banks had 6,664.3 trillion rials in assets -- 17.3% higher than the same month last year.

Also, the value of assets held by specialized banks increased 20% annually to reach 7,309 trillion rials at the end of Q3.

Total value of foreign assets held by commercial banks was 523 trillion rials, down 7.8% annually.

Likewise, total value of foreign assets held by specialized banks reached 1,439.7 trillion rials to post an annual growth of about 21%.