TEHRAN, Jan 5: Iran’s money supply is growing too fast, impeding efforts to curb inflation and threatening future economic growth, Central Bank Governor Ebrahim Sheibani was quoted as saying on Thursday.

Speaking at a banking convention, Sheibani said growth in the M2 broad money supply was on track for an annual rate of 35 to 36 per cent by the end of the current fiscal year on March 20.

That would be up from 30.2 per cent in the previous fiscal year.

The liquidity growth rate is dangerous for the national economy, the official IRNA news agency quoted him as saying.

Sheibani blamed high liquidity growth on a massive influx of petrodollars due to high oil prices, and on lax fiscal discipline.

The government funded current spending on salaries and subsidies by withdrawing billions of dollars from a rainy-day fund designed to store surplus oil revenues for leaner years.

With fiscal discipline ... inflation would be lower than 10 per cent because tapping into the Oil Stabilization Fund (OSF) increases liquidity and inflation, Sheibani said.

Annual consumer price inflation in Iran has hovered around 14 per cent for the past three years.

If inflation were lowered to 6 or 7 per cent it would bode well for economic growth, he said, adding that real GDP growth for the 2005/06 fiscal year was on course for about 6 per cent, below the targeted rate of 7.1 per cent.

Sheibani’s comments echoed recent criticism of Iranian fiscal policy by the International Monetary Fund, which in a report last month said Tehran was doing too little to cut spending and costly subsidies.

Sheibani said the OSF currently contained only $5 billion despite two years of booming oil revenues well above budgeted levels.—Reuters