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WORLD> Middle East
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Iran finds a way to fight inflation, lopping zeros off
(Agencies)
Updated: 2008-09-02 10:18 In recent weeks, Iran has issued higher-denomination notes to try to ease transactions, which can be complicated and time-consuming with smaller-denominated bills. The central bank issued 500,000 rial and one million rial notes that carry the figures 50 and 100 on their backs, prompting speculation that the rial might lose four zeros. Both conservatives and reformists have blamed high inflation on Ahmadinejad's mismanagement of the economy. Top conservative cleric Ali Akbar Nateq Nouri, a confidante of Iran's supreme leader, warned Saturday that Ahmadinejad's economic policies threaten to keep Iran from its goal of becoming a regional superpower by 2025. Three years ago, Iran embarked on a 20-year plan to become a regional superpower and a leader in technological and economic know-how. In particular, the plan is focused on development in nuclear technology, science, industry and education. The high inflation is blamed mostly on a huge increase in liquidity, caused by oil revenues' impact and Ahmadinejad's insistence on lowering bank interest rates, say independent economists. The central bank privately opposed his efforts to lower rates. Iran earned around US $80 billion from crude oil exports last year. Ahmadinejad's government converted most of that into Iranian rials and injected it into the country as loans, often to political favorites, some critics say. Many economists had warned that such policies would lead to inflation, but they view fixes such as removing zeros as little help. Mohammad Tabibian, an Iranian economist, said bringing discipline to monetary policies is the only true solution. The troubled African nation of Zimbabwe drew attention to its chaotic economy this summer when it slashed 10 zeros from its currency. Private financial institutions say Zimbabwe's inflation rate was an astonishing 12.5 million percent in May and estimate it has climbed higher since. |
