When the Minister of Economy Calls Iran's Banking System 'Sick'

The Iranian Minister of Economy described the country's banking system as 'sick' and 'suffering from numerous problems'. According to IRNA, the official news agency of the Islamic Republic, Ali Tayebnia stated on Thursday in a meeting with economic activists in Fars province that a lack of capital, the government's 90 trillion tomans in debts, and banking arrears are some signs of the illness of Iran's banking system. He considered the capital of banks to be more essential than daily bread and added that the eleventh government inherits 300 trillion tomans in debt, emphasizing that repaying the government's debts to banks is another priority that is being pursued vigorously. Hassan Mansour, an economist residing in London, explained the situation of Iranian banks in the face of liquidity shortages, stating that the so-called commercial banks are in a position where they are owed about 90 trillion tomans by the government, have approximately 150 trillion tomans in arrears (loans that they have given but cannot collect), and hold about 80 trillion tomans at the Central Bank as reserves, which they must maintain as legal reserves. Consequently, banks have over 300 trillion tomans outside their reach, and until these funds are made available to banks, they will not be able to provide credit to the economic and productive sectors that are urgently needed today and tomorrow. The issue is that these factors are interconnected and render the banks' situation practically impossible. If the government does not pay its 90 trillion tomans in debts to the banks, and if it also does not pay its debts to the non-banking sector, then that non-governmental sector, which is the so-called private sector, will also be unable to repay its debts to the banks. The result is that banks cannot extend credit with empty hands, and if they do not provide credit, the Iranian economy will not recover. Various issues have been documented and even turned into legal bills, but none of this makes sense if it is not clear when the money will be made available to the banks. The Minister of Economic Affairs criticized the approach of reducing the size of the government and reforming past economic behaviors, stating that global experience has shown that successful countries are those that have managed to create a suitable business environment for the activities of people and the private sector and have avoided excessive government interference in the economy. Tayebnia further stated that the government is not a competitor to the private sector in investments and production, asserting that the government seeks to minimize its intervention in economic affairs, allowing economic enterprises, entrepreneurs, and the private sector to engage in activity and production. However, given Iran's economic structure, even if the government does not directly intervene in economic matters, experience has shown that the influence of government officials or centers of power has significantly impacted the economic sphere, making it unclear how accurate the Minister of Economy's statements can be. The Minister of Economy also emphasized that the state-owned and oil-dependent nature of Iran's economy has resulted in very limited and negligible economic growth over the past 40 years. He criticized this situation, stating that such minimal growth is 'not befitting the great nation of Iran' and added that a country that possesses all resources and talents cannot maintain its status and dignity, nor provide a dignified life for its people with a state-owned and oil-dependent economy.