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EghtesadOnline: The government’s debts to the banking system currently accounts for 10% of the money supply and the banks’ debts to the Central Bank of Iran constitute 22% of the monetary base. Without doubt, budget deficit is the source of this huge debt.

An Iranian economic/political figure, in a recent meeting of experts, warned against overemphasizing the issue of budget deficit as being the main cause of inflation. He said such an overstatement is “a geopolitical mistake and a big political lie; those who want to topple the government inflate this issue whereas the problem is corruption and the financial imbalances plaguing banks.”

In this article, I try to list the main contributors to banks’ financial imbalances and consequently the government’s budget deficit. Note that budget deficit refers to the additional annual expenditure of the government over its revenues, regardless of whether it has been specified in the annual budget [the document] or not.

Gholamreza Salami, the former head of the Iranian Association of Certified Public Accountants, prefaced his editorial in the Persian daily Donya-e-Eqtesad with this note. A translation of the text follows:

Expert banking system Iran’s Banking System