Iran's Liquidity Increased By 40% In One Year Amid US Sanctions

Iran’s liquidity grew by 40 percent from early 2021 to 2022, according to its central bank, as the country continued to print money amid a revenue crunch.

The amount of cash in the economy was more than 3 quadrillion rials (15 zeros) 14 months ago and jumped to 4.6 quadrillion in February this year. In US dollars the amount might not seem staggering, reaching almost $200 billion, only because the rial has fallen more than eightfold against the dollar in the past four years.

The first six months of this period covers the former Rouhani administration and the next six months the presidency of conservative cleric Ebrahim Raisi, who pledged to control liquidity and inflation during his presidential campaign last June.

But little seems to have improved since August when Raisi took office. Inflation continues at the annual rate of more than 40 percent, while prices of food and other essential goods are rising even faster.

The Raisi administration so far says it is trying to deal with the damage done by the previous government, but people and politicians are increasingly skeptical, saying eight months was ample time for the new president to make a difference.

A breakdown of the Iran’s central bank (CBI) numbers issued on Monday shows that almost half of the increase in liquidity occurred since early August, debunking Raisi’s claim that his government has restricted borrowing from the CBI.

The borrowing continued as the government claimed oil exports increased by 40 percent since August, and presumably its foreign currency revenues also jumped. Oil minister Javad Owji announced on Tuesday that in the past 12 months Iran exported $43 billion of crude oil and derivatives. That is almost double of what was sold in the previous year.

Politicians and media ask where is the impact of the additional government income? Why the currency stays low, and inflation continues at the same rate.

The Raisi administration and its supporters say that the government has been repaying debts incurred during Rouhani’s presidency, but it all does not make sense if liquidity is increasing. One official said that since August the government has spent $400 million a month to repay borrowings by the former administration. A Raisi supporter in parliament said on Tuesday that the Rouhani government printed money against unrealized foreign currency income, thus fueling liquidity and inflation. He was referring to Iran’s funds blocked abroad because of US sanctions.

Rouhani’s central bank chief, Abdolnaser Hemmati has challenged Raisi’s officials to a public debate to rebuttal their accusations.

As the government and the parliament struggle to tell the public that the situation will improve, few public figures dare to openly say that Iran’s economic problems cannot be solved without first reaching an agreement with the United States and lifting oil export and banking sanctions.

Negotiations in Vienna have stopped since March, but the main decision maker in the country, Supreme Leader Ali Khamenei insists Iran can solve its economic issue independent of the nuclear talks.

Oil minister Owji also said on Tuesday that only the country’s natural gas sector needs an infusion of $80 billion to be able to increase falling production. In November, he had announced that the oil and gas sector needed $160 billion to retool and rejuvenate itself.