Following the Iranian regime Supreme Leader Ali Khamenei’s statements regarding the imperative to curb the growth of liquidity, the Central Bank of Iran has released a report revealing a nearly 32% increase in the liquidity rate in December compared to the same period last year.
During a meeting with economic activists on January 29, Khamenei urged the cessation or reduction of liquidity growth in Iran, claiming that producers’ dissatisfaction indicates the government’s failure to heed his warnings from the previous year.
The Central Bank of Iran’s report, while refraining from specifying the volume of liquidity in the country, emphasized the concern over the ‘deceleration of liquidity growth,’ a point of contention with the International Monetary Fund’s estimates.
A section of the report also acknowledged a 31.7% increase in liquidity in December compared to the same month the previous year. Notably, the Central Bank’s report on January’s liquidity has yet to be published.
The unchecked expansion of liquidity, driven by the government’s insistence on the central bank printing fiat money to address budgetary shortfalls, stands as the primary catalyst for rampant inflation in Iran.
Though the central bank omitted the volume of liquidity in its report, historical data in its statistics archive indicates liquidity was 5,907 trillion tomans in December of the preceding year. Factoring in the 31.7% growth over the year, this figure rose to 7,780 trillion tomans.
This index stood at 3,921 trillion tomans at the onset of Ebrahim Raisi’s presidency, implying a doubling of the country’s liquidity solely during his term.
For over a decade, Iran’s government has heavily borrowed from the central bank, other domestic banks, and the National Development Fund to offset budgetary deficits, compelling the central bank to print fiat money. This practice has resulted in a surge in liquidity and, consequently, inflation in the country.
Contrary to the Central Bank’s report, the International Monetary Fund’s statistics estimate an upward trajectory in liquidity growth in Iran this year.
According to the fall-published estimate, Iran experienced an average annual liquidity growth of approximately 25% in the last decade, reaching 31% last year, and is projected to hit around 47% this year.
Iran leads in liquidity growth among the Middle East and Horn of Africa countries. To illustrate, Iran’s liquidity growth is five times that of Saudi Arabia, with Iran’s inflation rate exceeding Saudi Arabia’s by over 17 times. The International Monetary Fund forecasts Iran’s inflation rate at 47% this year, while Saudi Arabia’s figure stands at a mere 2.5%.
The report also indicates that the Iranian government’s debt has escalated to the equivalent of $112 billion in 2023, with a projected increase of $6 billion in the following year. Iran’s government debt now constitutes one-third of the country’s gross domestic product.
