Iran to issue deposit bonds to tame inflation: Chief banker
The Central Bank of Iran (CBI) governor says the bank is planning to issue deposit bonds, a new type of security approved by the lender’s Shariah advisory arm, as it seeks to contain inflation through reducing the amount of money supply in the country.
Akbar Komeijani said on Tuesday that the CBI has been making preparations to issue the deposit bonds, or what will be locally known as Oragh Wadiaa.
“We hope we can use this instrument this year (to March) to control money base and the inflation rate,” said Koemijani while addressing Iran’s Islamic Banking Conference, a annual gathering of senior government officials and major economists which is being held virtually this year due to the coronavirus restrictions.
Komeijani said Wadiaa bonds will replace corporate bonds issued by the CBI over the past two decades.
Wadiaa bonds were approved in 2019 by members of the CBI’s Jurisprudence Council, a body which screens monetary policies and banking mechanisms to decide if they comply with the Islamic principles.
Under the Wadiaa scheme, bond holders would deposit their funds in a frozen account in the CBI and the lender guarantees to repay the funds on the maturity date based on actual market prices.
The monetary policy is meant to help the government and the CBI to reduce the money supply and to influence the consumer prices in the Iranian market.
Iran has seen high but controlled levels of inflation in the past three years as the economy has struggled under the double burden of the US sanctions as well as the spread of the coronavirus pandemic.
Bond issuance has been a major part of CBI’s monetary policy in recent years as the bank has sought to help the government gain funds needed to finish its massive development projects.
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