– After the devastating devaluation of Iranian Rial against foreign currencies, the nation’s money started a recovering trend with chaotic ups and downs. The unbelievable rates of more than 19,000 for USD/IRR plummeted to reasonable levels (circa 12,000) and went down even further during the past week (entering 11,000 band).
– After the recent directive allowing Iran Central Bank to get involved with the nation’s FX market, now the cabinet members is to expand the scope of CBI activities even more to include not only FX policies but also monetary ones. Doing as such, the CBI has now granted 3 new instruments to balance the currency/monetary needs:
– After the recent jumps of FX rates for the second time again, Iran Central Bank is to utilize Open Market Operation in order to maintain the falling value of Iranian Rial against foreign currencies. News has that CBI is going to allow authorized banks and exchange houses to inject FX into the market and maintain the current chaotic situation. The required resources to do as such will be supplied from the CBI currency reserves along with the export revenues of non-oil producers.
– Following the USD/IRR sudden jump surpassing the IRR 50,000 threshold, members of Iranian parliament criticized Iran Central Bank’s performance in managing the fluctuations and started to prepare a solution to establish calmness in the market. To this end, a meeting is planned between CBI officials and the Majlis Economic Commission members; in case the meeting fails to reach an agreement, the parliament commission will resort to a double-urgency motion to restore stability in the forex market later on. Nevertheless, the minister of economic affairs and finance has assured that such volatility is temporary and economic conditions will get back to normal soon.
– On the 7th conference on Monetary Policies and Challenges Ahead Iran Banking Sector and Production held yesterday, the modernization and independence of the Iran Central Bank were deeply discussed. Resorting to examples like the operation of non-regulated financial institutions plus the divergence between the interest rate on banking deposits and the declining inflation rate to stress on the necessity of the CBI independence, lecturers raised the question whether the CBI had the required structure and authority to prevent such problems in the first place or not.
– After the offering of Iran Central Bank rescue package and only in 5 working days, a figure of IRR 1,010,000 bn (cUSD 22.56 bn) from nation’s money supply (e.g. liquidity) migrated from streets to 20% bank deposits. Emphasizing on that, the chair of CBI announced that the other two tools of mentioned rescue package (pre-sale of gold coin and IRR deposits backed by foreign currency) was not as effective as.
– Iran Central Bank managed to control the forex market fluctuations through offering its rescue package over the past week. While some economists believe that such a package will act as a proper tool to relax the current fluctuations and enable the policy maker to implement its reform plans free from irrational behaviors, there are some disagreeing with high interest rates, even for a temporary and short period of time. In other words, the first group believe that lowering such a rate by decree will not yield the proper result the policy maker is looking for while the other group say that the current CBI supervisory structure and not-respecting health indices by banks will push them towards old days, paving the way for un-regulated financial institutions re-gaining power in the market. However, what is common between those for and against the CBI directive lies within the temporary nature of this solution, which will only act as a painkiller and the need to address the structural reforms in monetary and financial areas ASAP.
– Following the Iran Central Bank directive on prohibiting banks and credit institutions from non-banking operations, eventually aimed at complying with internationally accepted standards to accelerate the resumption of its activities with their foreign peers, Bank Saderat announced the plan to divest its stake in 5 companies. Consequently, 98% of Sepehr Energy (energy sector), 95% of Tose’e Sepehr-e Tehran Investment, 100% of Tose’e Sepehr-e Mandegar-e Khorasan, 100% of Tose’e Sepehr-e Fars (all in housing and construction sector), and 65% of Sepehr-e Jam Tourism Investment (tourism space) will be offered by this bank.