The Iran Project

Iran plans massive liquidity injection to fix economic woes

Press TV – The Central Bank of Iran (CBI) says it is ready for massive liquidity injections into the banking system as part of efforts to help government shore up the economy.

CBI governor Abdolnasser Hemmati said on Friday that the lender would ramp up its efforts for implementation of the newly-launched open market operations (OMO) to help the government fix the economic woes caused by the US sanctions as well as the spread of the new coronavirus in the country.

“The CBI is ready to extensively use the OMO for helping the government face the problems and assist the economic growth,” said Hemmati in a social media post.

Hemmati’s promise comes a day after the CBI board of governors approved a series of guidelines and rules for implementation of the OMO policies, including the rates for repurchase and reverse repurchase agreements.

Under the new policies, which has been a first in CBI’s 60-year history, the bank buys and sells bonds issued by the government and owned by state and private banks in Iran.

The repo and reverse repo trade allows the CBI to regulate the size of overdrafts in the intrabank system and control the interest rates in the market.

Hemmati encouraged the government to issue more Islamic bonds, known as sukuk, to both access new sources of financing and help the banks to have a better control over their balance sheets.

He said CBI’s implementation of the OMO policies is becoming more popular in the market after several rounds of trade that began in January.

Hemmati said even those who initially criticized the new policies are now demanding their increasing use by the CBI.

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