Lower Rates to Boost Iran’s Economy
By Mahdi Goodarzi & Mojde Rezaee
Of the major challenges with which Iranian manufacturing companies are struggling is the liquidity lack. This comes mostly from banks’ lack of a rating system to properly distribute banking resources in addition to high interest rates on bank deposits, which have raised financing costs.
Considering the still under-developed role of Iran’s capital and debt markets in financing, producers seeking for facilities largely refer to banks. Unfortunately, not only have banks’ troubled balance sheets lowered their ability to grant facilities, they have also been placed in an unhealthy competition to absorb money just to meet their previously made commitments to depositors. The final result has been nothing but higher interest rates on deposits, burdening banks with even more commitments. The rise in interest rates has eventually increased facilities’ prices. Expensive facilities, when Iran’s economy seems to have just kicked recession and showed signs of growth, will threaten the remained active companies’ survival.