Bank Debts Behind Monetary Base Growth

EghtesadOnline: A review of official data published in Central Bank of Iran’s reports by Tehran Chamber of Commerce, Industries, Mines and Agriculture shows that rising liabilities of the banking system to the central bank has been the main reason behind a surging monetary base.

News ID: ۷۸۳۹۴۰

10 September 2018

CBI reports show that by the end of the fourth month of the current fiscal year on July 22, Iran’s monetary base reached 2.53 quadrillion rials ($19.34 billion) to signify an 18.2% growth compared to when the current fiscal year began on March 20.

“Calculations show that about 7% of the monetary base growth has been due to an 11.4% rise in the debts of banks to the central bank,” TCCIM said in a short analysis published on its official website, pointing out that this reflects a 61% share of total monetary base growth in the aforesaid period.

“Based on central bank figures, the result of this has been reflected in an increase of more than 1 quadrillion rials ($7.65 billion) in the country’s total liquidity,” Financial Tribune quoted him as saying.

Rampant money supply is one of the biggest ailments hurting Iran’s economy, especially during the past few months when a currency crisis challenged all markets.

The volume of banks’ liabilities to CBI grew by 11.4% during the first four months of the current year compared to the beginning of the year to reach about 1.47 quadrillion rials ($11.23 billion). In other words, their liabilities grew by about 150 trillion rials ($1.14 billion), about 73 trillion rials ($558 million) of which increased only during the fourth month.

The total volume of deposit entrusted by the public to the banks has been dwindling from the second month of the current year.

“The growth in the debts of banks to the central bank may be partly due to this continuous trend that can be worrying,” he said.

Increased bank debts to central bank are reflected in the resources section of CBI’s balance sheets, meaning that they exert a direct influence over the growth of monetary base that increases money supply.