Expert: Iran Government’s way of paying off debts Central Bank is more like stage magic
Trend - 07/22/2013
Pr.Kamran Dadkhah’s exclusive article for Trend. Iranian origin economist Dadkhah is associate professor in the department of economics at Northeastern University, Boston.
Finding reliable data on the Iranian economy has become increasingly more difficult. The data on government debt to Bank Markazi (the central bank) is reported in the annual balance sheet and economic report of the bank. For the past three years the bank hasn’t published its balance sheet; the last issue published was for the year 2009. Based on other reports of the bank we know that by the end of 2010, the government (including companies and organizations owned by the government) debt to the central bank was 219 trillion rials or at the official exchange rate of the time, $17.9 billion.
On June 9 of this year Mr. Shamseddin Hosseini, Iran’s finance minister, declared that the government and government companies and organizations owed the central bank the equivalent of 350 trillion rials. Then Mr. Ahmad Tavakoly, a member of the Iranian Majlis (parliament) declared that the government has reevaluated its dollar deposits in the central bank using the new official exchange rate. Since the difference between the new rate and old rate is 12740 rials and since the government had deposited $58 billion, this would add 740 trillion rials to the government deposits in the bank. If we believe the numbers of the finance minister and Mr. Tavakoly, then the government has wiped out its debt to the central bank and has even 390 trillion rials extra to bequeath to the next government.
But this is no more than legerdemain (an accounting trick). The government could have set the official rate at 30,000 rials per dollar and in that case the difference would have been 1029 trillion rials. But an economy cannot be managed with accounting tricks.