Even as talks to conclude a comprehensive nuclear deal between Iran and the six world powers have entered what amounted to triple overtime, negotiators in Vienna, Austria, continue to convey a mood of dogged optimism.
In an opinion piece in keeping with that vein of optimism, Akbar Komijani, deputy governor of the Central Bank of Iran, has weighed the prospects for Iranian banks once the harsh sanctions imposed by the UN, the US and the European Union are lifted. The article was published in the website Banker on Thursday.
Although Komijani champions the removal of all nuclear-related sanctions against Iran, his immediate focus is on the easing of restrictions on the country’s financial sector, including Iranian banks’ denial of access to SWIFT—the global supplier of secure messaging services and interface software to major financial entities.
Komijani welcomed the prospect of the release of CBI’s and other banks’ frozen funds abroad and said with the lifting of sanctions, banks would be free to choose their international partners as they see fit.
“Thus we expect our banking and financial system to have access to all financial and money markets and that our banks be treated equally with banks in other countries,” Komijani wrote.
The deputy governor, however, cautioned that the short-term effects of any relief in sanctions would not be felt immediately on key aspects of the economy.
“If the international sanctions are lifted this summer, we cannot expect that it would have an immediate impact on macroeconomic variables during the third quarter, but its upsides will begin to emerge by year’s end,” he maintained. “The main short-term result would be a surge in positive sentiments about the return of capital to markets and manufacturing.”
Stable Money
One big concern of the central bank during the past two years, according to Komijani, has been to stabilize the foreign exchange market. He said the short-term strategy of the bank has been to cushion the market against currency shocks.
“The bank’s collective policies in this area and its calculated intervention in the forex market buffered it against speculative activities and put an end to the tumultuous days of 2012 when the Iranian rial hit record lows against the dollar,” he said.
“The gap between the greenback’s market rate and that of the rial has been narrowed to 2,346 rials in 2013 from 7,410 rials in 2012 and rial’s nominal depreciation in the free market has dropped to 3%, which is acceptable.”
Announcing that International Monetary Fund has forecast a growth of 0.6% for Iran, Komijani noted the forecast did not take into account the possibility of any breakthrough in Vienna talks and assumes the worst-case scenario.
“If we make room for a more realistic outcome in the talks, the expected growth rate would rise higher as some domestic research firms have predicted a growth rate of 2.5% to 3%,” Komijani insisted.
He also pointed to the successful anti-inflationary measures taken by the government in curbing 40% inflation that afflicted the economic system and said since the current inflation rate–at 15.5% -continues to be fed by structural units of the economy, its tackling requires beefed up monetary and financial discipline and a reform in elements of the economy that stoke inflation.