The Iranian government’s financial and Central Bank officials are now speaking about banknote printing in public. Because hiding the government’s financial problems does make any sense more.
Printing fiat money is a blow to the country’s money power and a systematic looting from the peoples’ wealth by the government. It will lead to a huge inflation in the country and have devastating effects on the country’s economy and its smog will burn the people’s eyes, experts say.
About printing fiat money and its reason, some officials said things that are interesting. The state-run daily Arman wrote: “The most important structural factor of inflation in the Iranian economy is the government’s budget deficit. Without the coronavirus crisis, the government’s budget deficit for this year was projected at 130 trillion tomans.
“Traditionally, the government’s budget deficit in the Iranian economy has been offset by the government taking over from the Central Bank, borrowing from the bank and printing banknotes, which increases the monetary base and liquidity, and ultimately has an inflationary effect.” (State-run daily Arman, April 12, 2021)
In March of this year Vahid Shaghaghi, one of the government’s economists, confessed about the government’s malign behavior and said: “In a situation where we are facing a high deficit, there is a double pressure on the resources of banks and the Central Bank, which results in a rial withdrawal from the National Development Fund, for printing banknotes. (State-run daily Arman, April 13, 2021)
Also, in this month, Abdul Nasser Hemmati, Governor of the Central Bank of Iran, in an interview with the State TV Channel Three, announced the debt of 900 trillion tomans of 11 large debtors to the banking system. He confessed about the government’s malign activities to hide its banknote printing with tricks like ‘Currency exchange earnings’ and said: “In 2019 and 2020, parts of the government budget were financed through the National Development Fund’s foreign exchange earnings, which simply means printing money.” (ICANA, April 5, 2021)
Another trick that the government is using to wipe its trace of printing banknotes are the issuance and offer of government bonds. State-run daily Vatan-e-Emrouz on March 16, 2021 wrote: “Since early 2020, the government has issued and offered government bonds to finance the required materials of its budget. According to statistics released by the Central Bank, Treasury and the Ministry of Economy, the government has issued nearly 200 trillion tomans of debt securities since the beginning of this year. These bonds are generally issued with maturities of one to three years and their interest rate has been about 22 percent.”
Two days before this, Vahid Shaghaghi, an economist, wrote that the government’s borrowing from bank resources and selling government property could not cover its budget deficit and said:
“Realization of about 400 trillion tomans of government revenues in the budget depends on the sale of surplus property, shares of state-owned companies, financial and Islamic publications, and the provision of resources from these places is unlikely next year.
“The government does not have the capacity to issue this number of shares and issue financial and Islamic securities, so we will have a high operating balance deficit.”
“In a situation where we are facing a high deficit, there is a double pressure on the resources of banks and the Central Bank, which results in a rial withdrawal from the National Development Fund. And since the reserves in the fund are very limited, we know that any withdrawal from the National Development Fund will be a printing of money.” (State-run daily Arman, March 14, 2021)
The immediate result of the government’s corrupt actions in borrowing from bank resources, and the increase in the exchange rate in 2020, was taking from the people and a dramatically increase in inflation and the price of goods.
In 2020, the inflation of vegetable oil was reported to be about 150 percent, and legumes such as lentils, peas and chickpeas doubled in their price. This shows that the consumer goods in the household basket also faced a significant increase in prices in 2020. After these goods, in the next ranks are butter, soft drinks and machine eggs. It seems that some households have eliminated the consumption of some of these foods due to the high inflation of these goods. Excluding certain foods such as eggs or legumes will cause food poverty for households, especially in low-income deciles.” (Donya-e-Eghtesad, April 11, 2021)
Given that in this year the government still needs to turn to the printing of banknotes, the result is nothing but inflation and deepening poverty in society.
On inflation, the state-run daily Jahan-e-Sanat on April 12, 2021 wrote: “We are still at the beginning of the year and it is not clear what will happen in the coming months. However, it is predicted that the average inflation rate in 2021 will be higher than the inflation in 2020. It is speculated that high inflation will hit the economy this year and given that income levels have not adjusted in line with inflation over the past few years, people will be under severe inflationary pressure.”
Source » iranfocus