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UN Resolution 1737

Iran's c.bank sees no need to change rial rate policy PDF Print E-mail
Monday, 28 July 2008

ImageTEHRAN, July 28 (Reuters) - Iran's central bank sees no need to change the country's managed floating exchange rate policy, media reported on Monday, after a minister said the government was studying strengthening the rial against the dollar.

The remarks by Governor Tahmasb Mazaheri suggest another policy rift between the central bank and government, already at odds over interest rates. Rates were kept steady this month well below inflation, despite the bank's call for raising them.

Acting Economy Minister Hossein Samsami said in comments published on Sunday Iran was considering strengthening the rial against the dollar, possibly to a rate of about 4,500 rials to the greenback compared with the current level of 9,211 rials.

Central Bank Governor Tahmasb Mazaheri said the existing exchange rate system was working well.

"The rate for foreign exchange has enjoyed relative stability in recent years and has contributed to market stability," he said in comments carried by the economic daily Donya-ye Eqtesad.

"Iran's foreign exchange rate system has been managed on a floating basis, in which the interests of groups such as exporters and manufacturers are taken into consideration, and one must not unreasonably disrupt the stability of this market," the newspaper quoted the governor as telling reporters.

Asked about the idea of strengthening the rial to around 4,500 rials to the dollar, the governor said: "This rate pertains to years ago, and the determination of the dollar rate under the present conditions would require extensive studies."

Differences between Mazaheri and the government have become increasingly public. The evening edition of a leading newspaper was shut last week on the grounds that it had harmed the economy by reporting a row between ministers and the governor.

Mazaheri has been calling for higher interest rates to tackle inflation, now running at about 26 percent, but has run into opposition from ministers who say this would hurt job creation and stifle investment.

Interest rates were kept at 12 percent for the year 2008-09, media reported on Saturday. Although not the rate rise Mazaheri sought, one analyst said it was a relative success that he had managed to block the president's previous calls to lower rates.

Economists say rates need to rise sharply and the government must rein in spending of petrodollars if prices rises are to be brought under control.

The last central bank governor quit last year, also following differences with the president over rate policy.

Ahmadinejad, whose government is under Western pressure over Iran's disputed nuclear programme, has blamed rising inflation on factors including Iran's dependence on imports, the dollar's global weakness and plots by the Islamic Republic's enemies.

The rial exchange rate has stayed relatively stable against the dollar, tending to hover around 9,200 rials or so, although it has weakened against the euro in line with the greenback.

Some of Iran's biggest trading partners are European, making those imports more expensive and feeding into inflation.

Mazaheri was quoted as saying that only 3 percentage points of Iran's inflation rate was being imported.

(Reporting by Hashem Kalantari and Edmund Blair; Editing by Ruth Pitchford)





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In Focus
Iran's nuclear standoff
  • Iran Focus: Tehran, Iran, Nov. 20 - The following is the full text of the most recent report by the International Atomic Energy Agency's director-general on the level of Iranian cooperation over its suspected nuclear weapons program.

  • Reuters: The UK government accused Iran on Thursday of failing to cooperate with a United Nations watchdog and said this increased its concerns over Tehran's nuclear programme.

  • New York Times: Iran has now produced roughly enough nuclear material to make, with added purification, a single atom bomb, according to nuclear experts analyzing the latest report from global atomic inspectors.

  • Wall Street Journal: United Nations investigators found "significant" traces of uranium used in reactors at the wreckage of a Syrian facility that Israel bombed last year, and Iran is ramping up production of nuclear fuel while denying investigators access, the International Atomic Energy Agency reported Wednesday.

  • Reuters: An inquiry by the U.N. nuclear watchdog into alleged atom bomb research by Iran has degenerated into a silent standoff a few months after Tehran asserted "the matter is over," U.N. officials said on Wednesday.

  • AFP: Iran is still defying UN demands to suspend uranium enrichment and not cooperating with investigations into claims that its nuclear programme has a military aspect, the UN atomic watchdog said Wednesday.

  • Reuters: Iran is aiming to commission its first nuclear power plant in 2009 after years of delays, the official IRNA news agency reported on Tuesday.

  • Los Angeles Times: World powers this week failed to come up with a unified strategy to press Iran on halting controversial elements of its nuclear program, as a report emerged suggesting the country had made progress in advancing a little-examined feature of its atomic infrastructure.

  • AFP: Russia is against fresh sanctions on Iran over its disputed nuclear programme as demanded by some Western powers, Deputy Foreign Minister Sergei Riabkov said on Friday.

  • Reuters: European Union foreign policy chief Javier Solana said on Friday further contacts with Iran were possible soon to try to resolve the dispute over its nuclear programme.

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