In response to Iranian regime’s supreme leader Ali Khamenei’s statements regarding the need to halt the growth of liquidity, the Central Bank of Iran has published a report indicating a close to 32% increase in the inflation rate in December 2023 compared to the same period in 2022.
On January 30, Khamenei called for a halt or reduction in the growth of liquidity in Iran and claimed that the dissatisfaction of producers was a result of the government’s failure to heed his warnings in the past year.
The Central Bank of Iran’s report highlights the significant increase in the rate of liquidity growth, which contradicts the estimate of the International Monetary Fund.
The report does not mention the actual amount of liquidity in the country but emphasizes the reduction in the pace of liquidity growth. The report on the January liquidity level from the Central Bank of Iran has not been published yet.
However, it is widely acknowledged that the distorted growth of liquidity, resulting from the government’s pressure on the central bank to print banknotes without adequate backing to cover budget deficits, is considered the primary factor contributing to the rampant inflation in Iran.
However, the Central Bank’s statistical archive shows that liquidity was equivalent to 59,070 trillion rials (approximately $107.2 billion) in December 2022. With a growth rate of 31.7% over the course of a year, this figure has reached 77,800 trillion rials (approximately $141.197 billion) in December 2023.
At the beginning of Ebrahim Raisi’s presidency, the liquidity in the country was 39,210 trillion rials (approximately $71.161 billion), which means that it has doubled in just two years.
Over the past decade, Iranian governments have resorted to extensive borrowing from the Central Bank, other banks, and the National Development Fund to cover budget deficits, forcing the Central Bank to print banknotes without sufficient backing. This has been the main factor contributing to rampant inflation in Iran.
While the Central Bank’s report does not provide details about the money supply volume, the estimates from the International Monetary Fund suggest that the pace of liquidity growth in Iran is increasing this year.
According to these estimates, which were published in the fall of this year, the average annual liquidity growth in Iran over the past decade was around 25%, but it reached 31% last year and is expected to be around 47% this year.
Iran has the highest liquidity growth among Middle Eastern and African countries. For comparison, Iran’s money supply growth is five times that of Saudi Arabia, and the inflation rate in Iran is more than 17 times higher than that of Saudi Arabia.
The International Monetary Fund has assessed the inflation rate in Iran to be 47% this year.
The report also states that Iran’s government debt has reached $112 billion in the current Iranian year and is projected to increase by another $6 billion next year. Iran’s government debt is equivalent to one-third of the country’s gross domestic product (GDP).
