Reuters.com UPDATE 1-Iran inflation set to rise to 17%-bank official http://www.reuters.com/article/economicNews/idUSDAH05393920070520
Sun May 20, 2007 (Adds MP's letter criticising president, paragraphs 11-12) TEHRAN, May 20 (Reuters) - Iran should take action against rising consumer prices, a senior central bank official was quoted as saying on Sunday, forecasting strong money supply growth would push up inflation to 17 percent in the coming year. Ahmad Mojtahed, an adviser to Central Bank Governor Ebrahim Sheibani, said the economy was expected to expand by 5.2 percent in the first half of the Iranian year starting on March 21, apparently referring to an annualised rate. But Mojtahed, who heads a central bank monetary research unit, warned that measures to bring down inflation could affect growth and increase unemployment. The Islamic state boasts huge energy resources but struggles with double-digit inflation and jobless rates, as well as international sanctions over its disputed nuclear programme. "It is forecast that the inflation rate in the (Iranian year that started on March 21) will be 17 percent," Mojtahed said, according to the official IRNA news agency. "Right now inflation has reached 13.6 percent," he said. Officials usually refer to the average inflation rate, as opposed to the year-on-year rate which tends to be higher. Mojtahed said liquidity in the economy grew 40 percent last year and "the effects of this figure will appear in the coming year ... therefore some steps should be taken to stop inflation growth." Critics say President Mahmoud Ahmadinejad, who swept to office in 2005 vowing to share out Iran's oil wealth more fairly, has stoked price rises by profligate spending of Iran's petrodollars, often on current needs rather than investment. The government has blamed the media for exaggerating the problem and says it is bringing prices under control. A reformist Iranian lawmaker said on Sunday he had collected 35 signatures from other MPs in support of his letter sharply criticising Ahmadinejad's record, including the government's economic policies, the ISNA news agency said. "Liquidity growth was more than 50 percent which caused high inflation," the letter written by Akbar Alami said, accusing the government of refusing to accept the blame for rising prices in recent months. Asked what steps the central bank would take to bring down inflation, Mojtahed said selling so-called participation papers was one way of draining liquidity and he also listed other measures without giving details. "Maybe this will have a consequence of reducing economic growth or an increase in unemployment," he said. The International Monetary Fund has said large government spending out of the country's oil revenue -- which Iran has estimated at more than $50 billion this year -- challenged the central bank's ability to meet its monetary targets. © Reuters 2007. All rights reserved.
