Iran’s Hemmati warns against monetary financing

Abdolnaser Hemmati, former governor of the Central Bank of Iran, has warned the government was engaging in “indecent borrowing” from the CBI to cover spending.

Hemmati’s intervention, via his Telegram channel, came “a few days” before the newly elected president, conservative jurist Ebrahim Raisi, took office, on August 3. Hemmati had been one of Raisi’s opponents in the June election.

The former governor urged the government to finance the coming year’s large budget deficits through bond issuance. Iran International quotes Hemmati as saying that “it was quite clear to economists that selling government bonds was the only safe way to finance the budget without adding to the country’s growing inflation”.

He said Rouhani’s government should have raised more than 480 trillion rials in bond sales in the last four months. This comes to $11.4 billion at official rates and $1.864 billion at unofficial rates. He indicated that the government had raised only 49.6 trillion rials ($1.18 billion or $192.6 million). Iran International gives a figure of $700 million in bond sales.

In Iran International’s rendering, Hemmati claims that Rouhani’s government was “printing banknotes as a way of coping with budget deficits continued from March to July 2021 in an alarming way”. Hemmati was still governor of the CBI until the end of May 2021.

The former governor also cited rising import prices, saying that the budget for the upcoming year (1400 in the Iranian calendar) contained far too little for purchasing basic goods.

The government of Raisi’s predecessor, Hassan Rouhani, had named Hemmati the CBI governor in 2018. Rouhani’s government fired Hemmati on May 30, after the governor entered the presidential election. Akbar Komijani, the former deputy governor, succeeded as governor on June 30.