CBI Allocates Funds to Fight Coronavirus Crisis

EghtesadOnline: The Central Bank of Iran has paid the rial equivalent of €600 million demanded by the Health Ministry to help medical workers cope with the rapidly spreading Covid-19 pandemic, the CBI governor said.

News ID: ۷۵۱۳۴۹

28 October 2020

“The CBI will soon allocate another 80 trillion rials [€240 million] to the treasury for the Health Ministry, “Abdolnasser Hemmati was quoted as saying by the CBI website.

Hit hard by the deadly coronavirus, falling oil revenues deepening budget deficits due to the hostile US sanctions, the government is struggling to find funds to shore up its finances and fight the vicious virus for which a vaccine is still not officially available.

The government approached to the National Development Fund of Iran -- the sovereign wealth fund -- as the last resort. Its request early this year for loan from international lenders, such as the International Monetary Fund, was turned down due to US pressure.

The IMF’s shameful act in refusing Tehran’s humanitarian request due to the US’ threatening influence has come as shock to the Iranian nation. It needs mention that since the beginning of the Covid-19 crisis, the IMF has provided emergency financing to more than 76 countries, excluding Iran. Much of this was provided under emergency financing instruments designed to help countries with urgent balance of payments needs.

Earlier in April, the Leader of the Islamic Revolution Ayatollah Seyyed Ali Khamenei approved the withdrawal of $1 billion from the NDFI—to help fight the plague.

Iran has officially reported 600,000 corona cases since the outbreak in February. The virus has so far cut short 33,300 lives.  The spokeswoman for the Health Ministry, Sima Sadat Lari on Tuesday reported 346 fatalities overnight, ISNA reported.

According to the spokeswoman, 4,995 are currently in intensive care units and 463,000 have recovered. Iran has so far carried out 4.78 million PCR tests to detect patients infected with Covid-19.

The central bank has often said that it takes issue with withdrawals from the sovereign wealth fund because the foreign currency of the fund is inaccessible due to the US penalties under Donald Trump’s watch and the CBI has to print money to pay the rial equivalent of the NDFI loan applicants.

In an implicit response to complaints by the Health Minister Saeid Namaki over the CBI’s refusal to pay €1 billion from the NDFI, Hemmati said in September that “the CBI will resist attempts to pay the rial equivalent of loans taken from the NDFI to avoid harming the bank’s balance sheet by printing money.

Hemmati’s concern was related to CBI’s obligation to purchase foreign currency from NDFI and settle the payment in rials.

Buying NDFI currency is a rather superficial move when in actuality its resources are not accessible due to banking and economic restrictions that have made forex transfers from overseas impossible.

As per procedures, the CBI has to pay the government the rial equivalent of the foreign currency and receive the forex in lieu. However, since much of Iran’s currency reserves are blocked overseas and there is no possibility of unfreezing it in the foreseeable future, the CBI has to keep its printing presses running fulltime to be able to pay the government.