“The amount was 4.7% of the total spending in the current budget [ends March 2022],” Hamid Pourmohammadi told state TV.
This was while the government is allowed to withdraw the equivalent to 3% of the public budget from CBI resources, the Persian-language economic website Eqtesad News reported.
The government borrowed discretionary funds worth 6% of total fiscal budget in the past three years due to multiple developments such as Covid-19 and natural disasters.
With the adverse economic implications of pandemic subsiding, the government was supposed to borrow not more than 3% of fiscal budget this year.
As per the budget, total government spending should be 8,410 trillion rials ($36b) and can borrow 250 trillion rials ($1b).
In short, the government has borrowed about 150 trillion rials ($652 million) over and above the budget law and can fuel inflation. With the money multiplier at 7.68 points, the over-borrowing will increase money supply by 3,040 trillion rials ($13b).
Money multiplier measures the maximum amount of money that can be created by a given unit of central bank money.
Despite concerted efforts to control money supply, it has grown in recent months due mainly to government budget deficits and the US economic blockade.
While the chronic budget deficit has been a perennial challenge, prices have been rising rapidly due mainly to rising inflation expectations among the public.
Broad money supply reached 31,300.2 trillion ($136b) at the end of third quarter of the previous fiscal year on Dec. 20, indicating 38.4% annualized growth.
CBI figures show this was 2.2 percentage points higher than the first half of last year ending Sept. 21. Money supply jumped 26.6% in the nine months since the beginning of last fiscal year in March when it was 24,721.5 trillion rials.
The monetary base jumped to 4,075.4 trillion rials ($17.7b) in this period indicating 29.7% annual growth.
Observers says the main driver of price inflation is the mismatch and disproportionate economic growth rate in comparison to the ever-expanding money supply.