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August 2011" No. 60


Banking

Does the Central Bank Fulfill Its Duties?

Although monetary policies aim for economic growth and reduction of inflation as their main objectives" the main goals of these policies are to stabilize prices through the means that are available to the Central Bank.

The question posited here is "Does the Central Bank of Iran actually fulfill its duties?" According to economic reports" the volume of liquidity has increased 134 percent in the past five years. There will be 33 banks by the end of the current Iranian calendar year (started March 21" 2011). Meanwhile short-term foreign debts have been increasing in the past two years and figures on the economic growth rate have not been announced or calculated for the past three years. There are rumors about changing methods of calculation. Selling gold coins is another story as is outstanding claims of big banks. In addition" the monetary package prepared by the Central Bank of Iran will increase rent and price of the gold coin and will move people's deposits out of banks.

Since all these economic development cannot take place overnight" the main question is does the Central Bank observe all the above developments or not and what roadmap its officials have adopted to go through the status quo? Are they banking on their powerful experts? The existing evidence does not show this. Now that reengineering of the economic structure has started" what we need is to address structural factors which cause inflation. In short" the main qualification for becoming governor of the Central Bank of Iran is to make room for consultation and heed advisory opinions in order to achieve the main goal of the Bank which is to preserve the value of the national currency.

 

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  August 2011
No. 60