Gov’t to Amend Budget Law Again

The government plans to present amendments to the 2016-17 Budget Law once again, the Central Bank of Iran's deputy for economic affairs said.

Financial Tribune- The government plans to present amendments to the 2016-17 Budget Law once again, the Central Bank of Iran's deputy for economic affairs said.

The proposal had been previously voted down by the previous parliament. The amendment was also initially rejected by Majlis Economic Commission on the grounds that it would set a dangerous precedent for other administrations to use the country's forex resources irresponsibly.

"Any concerns that lawmakers might have regarding the matter can be alleviated by providing them with necessary explanations," Peyman Qorbani was also quoted as saying by IRNA.

"The government's proposal is to use excess forex resources to clear its debt to the banks and the CBI with no negative impact on the monetary base and liquidity," he added.

Qorbani pointed to the plan to increase the cushion capital of state-owned banks using forex resources as a significant component of the budget amendment. 

 "The proposal is being reviewed but at the end of the day, the CBI and the government will accept any decision made by the parliament," he said.

Referring to unifying forex rates as a "necessity" for Iran's economy and part of the Resistance Economy policies, the CBI official said there have been meaningful progress toward rate unification, "one of which was allowing banks to trade in the open forex market".

A week ago, the CBI allowed commercial banks to trade in the foreign exchange market, as part of the initiative to move toward a floating currency regime.

While some critics may believe that the unification of forex rates could breed corruption, Qorbani claims it is actually the other way around, identifying the dual exchange rate regime as the source of corruption.

"In the past few years, forced by sanctions and external pressures exerted over the economy, we employed a dual exchange rate system that was in no way ideal for the CBI. With new openings in forex activities, rate unification is expected to unfold by the end of the current year (March 2017)," he said.

"Increasing the banks' capital, the possibility of selling bonds to repay the government's debt to the banks and efforts to further cut the interest rates are among objectives pursued by the CBI with the goal of reaching the targets set in Resistance Economy."

Resistance Economy is a set of principles put forward by the Leader of Islamic Revolution Ayatollah Seyyed Ali Khamenei to foster economic self-reliance and reduce the country's dependence on oil revenues.

On the government's plan to launch a debt market to sell its debt to the public, the CBI official said, "Creating a debt market is being reviewed in Article 36 of the amendment to the Budget Law. If approved by the parliament, we will be able to launch a debt market."

The market will be launched through a cooperative partnership involving the Central Bank of Iran, Economic Coordination Council and Management and Planning Organization of Iran.

On a different note, Qorbani addressed the housing market and its purported exit from recession, saying studies show that demand and home sales have been on the rise.

"Moreover, we have experienced no significant rise in house prices," he said. "The current applicants in the market seem to be real buyers, signaling that the housing market is not entangled in speculative activities."

Financial tribune
Publish Date: Aug 8, 2016