Oil, gas and Iran economic analyst
Iran's broad money has doubled during the 2.5-year presidency of Ebrahim Raisi, according to statistics from the country’s Central Bank (CBI).
The statistics suggest that broad money has surged from 5.19 quadrillion rials in August 2021 to 10.33 quadrillion rials in January 2024.
Broad money, the total money supply within an economy, is the primary cause of rampant inflation in Iran. The inflation rate, as calculated by the Central Bank of Iran (CBI), is reported at 52.3% although the International Monetary Fund (IMF), citing estimates from the Statistics Center of Iran, puts the figure slightly lower at 47%.
Broad money is mostly obtained by printing the huge quantities of unbacked banknotes by CBI to cover the government’s debts, which rose significantly during Raisi presidency due to budget deficits.
Earlier this month, Abdolnaser Hemmati, the former governor of Iran's Central Bank, said the Raisi administration has printed 6 quadrillion rials over the past 2.5 years, a figure that "surpasses the total money printed from Cyaxares’s era [Median king, 625- 585 BCE] to 2021."
In a video statement, Hemmati stated that the surge indicates a 115% increase in the monetary base over 30 months.
Hemmati did not mention the broad money growth during mid-2018 to August 2021, when he was serving as the head of CBI, but the official statistics show the broad money has increased from 2.27 quadrillion rials to 5.19 quadrillion rials in this period, indicating 128% growth.
Therefore, the growth of uncontrolled banknote printing during his tenure is no less significant than during the presidency of Raisi. In fact, inflation surged from 8% in 2017 to 44% in 2022.
Hemmati was Raisi’s rival during the 2021 elections, but reportedly was supported by just 10% of Iranian voters.
Why does the CBI print unbacked banknotes?
Over the past five years, Iran’s Central Bank has ceased publishing government budget reports.
According to the Supreme Audit Court of Iran and the Research Center of the Islamic Legislative Assembly, however, it is estimated that since 2018—when the US withdrew from the Joint Comprehensive Plan of Action (JCPOA) and imposed sanctions on Iran’s oil exports—the government's annual budget deficit has consistently exceeded 30%.
The Iranian government has been compensating the budget deficit by borrowing money – in particular, from the banking system.
CBI statistics show that the government's debts to the banking system surged from 6.55 quadrillion rials to over 13 quadrillion rials – equivalent to 21 billion USD based on current currency rates in open markets – during the Raisi administration.
Every year, the CBI has to print huge quantities of unbacked banknotes in order to provide money to banks to cover the growing debt of the government.
Notably, bank debts share only 20% of the Iranian government’s total debts.
In addition, the government has withdrawn two-thirds of the National Development Fund (NDF) reserves to compensate for the budget deficit and to finance the current expenses of state-run companies.
The NDF was set up in the early 2000s with the aim of safeguarding a slice of oil revenues for the benefit of future generations, as well as to support the private sector with loans. Today, the Iranian government's debt to the NDF has ballooned to over $100 billion.
As a result, liquidity in the country has doubled during Ebrahim Raisi's 2.5-year presidency, reaching 30% of GDP, or 80 quadrillion rials – or $131 billion USD based on the rate in open markets.
