May 14, 2021
The Central Bank has acknowledged that Iran’s money supply has grown by an average of more than a quarter each year over the last two decades, an unheard of bloating of the rial.
“Due to structural flaws, average annual money supply growth was 27.6 percent in the past 20 years,” the public relations office said in a Twitter note.
“Simple arithmetic tells us that the money supply will double every three years, irrespective of who is at the helm of the monetary policymaking establishment.”
It blamed the huge growth on the US economic blockade, growing government budget deficits and Covid-monetary policies. However, the coronavirus epidemic only applied in one of the last 20 years and heavy sanctions were in effect for just one-third of that period.
As the accompanying chart shows, no major economy has even reached 20 percent in any single year since 2005. And the average has been well below 10 percent—putting the Islamic Republic of Iran in a rarified atmosphere.
Many countries have periodically had a huge jump in the money supply for a few years before getting the currency under control. But Iran’s huge annual jumps have been around for decades, starting even before the Islamic Revolution.
The Financial Tribune said records say money supply growth on average was 16.9 percent in the 1960s, 30 percent in the 1970s, 18.4 percent in the 1980s and 26.7 percent in the 2000s (through the end of March 2020).
The highest single year growth was in 1974-75 at 57 percent followed by 2006-07 at 39 percent and 38 percent in 1995-96.
As to what has led to the colossal money supply, the CBI earlier blamed multiple factors, namely the government’s constant over-borrowing from the CBI and the National Development Fund of Iran (sovereign wealth fund), even when the NDFI’s forex funds were inaccessible due to the US economic penalties.