Irans central bank can help to shave the countrys 40 percent inflation in half by withdrawing from projects it funded under former President Mahmoud Ahmadinejad, a top bank official said.Ahmadinejad, having pledged to improve the lives of poor Iranians, asked the Central Bank to help fund cheap housing projects and make cash payments to citizens after energy and food subsidies were halted in 2010, triggering price rises.
The Central Bank of Iran entered into areas and undertook roles it shouldnt have, Farhad Nili, director of the banks Monetary and Banking Research Institute, said in an interview in his Tehran office.
About half of Irans inflation is due to the banks involvement in Ahmadinejad-ordered projects, Nili said. The central bank should not commit any longer when it comes to housing and budget matters, he said. It should say, Im removing my balance sheet from your hands.
Inflation accelerated to 39 percent by the time Ahmadinejad left office in August, driven by his fiscal policies and international sanctions against Iran because of its suspected nuclear program. The Iranian government and world powers signed an agreement last month that traded sanctions relief for Iranian concessions on nuclear work.
Central bank Governor Valiollah Seif, appointed after President Hassan Rouhanis election in June, has said controlling liquidity and curbing inflation are top priorities.
The central bank had become a first resort and it should go back to being a last resort, Nili said. The institution should only intervene with conditions, in selective cases and when there is a crisis.
By Bloomberg
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