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Iran interest rate cut sparks panic selling

May 26, 2007 1:54 pm By Robert Spencer

Will the Iranian economy collapse, and the Thug-In-Chief be toppled, before the Mahdi returns? By Robert Tait in The Guardian (thanks to Morgaan Sinclair):

Iran’s financial system suffered a fresh jolt yesterday with panic selling on the stock market after the president, Mahmoud Ahmadinejad, abruptly ordered banks to cut interest rates sharply, despite surging inflation.

The order, which Mr Ahmadinejad issued by telephone during a visit to Belarus and which flew in the face of expert advice – has triggered warnings of a financial crisis and spiralling corruption amid fears of a capital flight from the country’s lending institutions.

Mr Ahmadinejad’s decree forced all state-owned and private banks to slash borrowing rates to 12%. Inflation is officially 15% but is generally believed to be much higher. State banks had been offering rates of 14%, while those in the private sector ranged from 17% to 28%.

The decision caused panic in the Tehran stock exchange, with private banks losing much of their share value overnight. Shareholders in one bank, Karafarin, queued on Wednesday to sell their stock when previously there had been 1.2 million applicants to buy its shares.

There was speculation yesterday that the move could force the resignation of the economy minister, Davoud Danesh-Ja’afari, who was not consulted.

And maybe of Ahmadinejad himself: “Tehran rate cut ‘is economic suicide,'” from the Gulf Daily News (thanks again to Morgaan):

TEHRAN: Iran’s Press and economists yesterday slammed a decision by President Mahmoud Ahmadinejad to slash interest rates, describing the move as “incomprehensible” and risking “economic suicide”.

The rate cut decision, which economists said could overheat an already inflationary economy, appeared to have been taken without the knowledge of economy minister who had said exactly the opposite just hours earlier.

“Economic suicide for banks,” the Mardomsalari newspaper said of move.

“The economy minister and the head of the central bank have to explain this decision since this decree is incomprehensible for economists,” the economy minister in the previous reformist government, Saeed Shirkavand, said.

Just the economy minister and the head of the central bank? Not the head Thug?

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