Iran General NewsIran's former central bank chief warns against fuelling inflation

Iran’s former central bank chief warns against fuelling inflation

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ImageAFP: Iran's former central bank chief has warned President Mahmoud Ahmadinejad against policies which further stoke inflation that topped 27 percent this year, a newspaper reported on Saturday.

ImageTEHRAN (AFP) — Iran's former central bank chief has warned President Mahmoud Ahmadinejad against policies which further stoke inflation that topped 27 percent this year, a newspaper reported on Saturday.

"The sharp growth of money supply and a surge in cash injection to the economy has been the main cause of inflation," Tahmaseb Mazaheri, who was replaced this week, wrote in a letter to Ahmadinejad carried by Etemad Melli.

"Despite policies adopted to control inflation there are still decisions being taken and legislation in place which fuel inflation," he said in the letter, which the daily said he wrote while still in office.

Mazaheri's replacement came after a public struggle with the labour ministry over financial policy, especially interest rates and loans to financial institutions.

The former chief favoured freeing up bank rates, coupled with tight controls on lending policy, to control liquidity and reduce inflation which rose more than 27 percent during his year in office.

In another letter to the Ahmadinejad, Mazaheri said he had decided to leave the post because "proposals made in reports (to the president) which are prepared by experts with a realistic view of the situation… are not and will not be accepted."

His departure came as several economists criticised the president over his economic policy, which involved a massive injection of oil money into the economy, leading to a rise in prices.

Mazaheri had resisted calls from critics inside the government who wanted a more flexible approach to loans for small production units.

Since coming to power, Ahmadinejad has favoured supporting small businesses in this way in a bid to reduce unemployment.

Economists, who have been widely critical of this policy, say that rather than creating new jobs the beneficiaries of such subsidies have often spent the money on other things.

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