Iran has cut the share of dollars in its foreign reserves to a minimum, about 20%, as it seeks to hold less of the U.S. currency in response to hostility from the United States, the country’s central bank chief said on Tuesday.
Ebrahim Sheibany, speaking to Reuters on a visit to Malaysia, also said Iran’s economy can withstand U.N. sanctions and the country has enough foreign reserves to handle any major shocks.
“In dollars now, it is at a minimum level, maybe around 20 per cent because we need to keep that,” Sheibany said in an interview on the sidelines of an Islamic finance conference.
The United Nations imposed new sanctions on Iran on Saturday because of Tehran’s refusal to agree to U.S.-led demands to halt its nuclear programme.
The sanctions target Iranian arms exports and 28 Iranian individuals and entities, and there is the threat of wider sanctions if Iran does not comply within 60 days.
Sheibany described the new sanctions as largely symbolic and said they posed little threat to Iran’s oil-led economy.
“I do not think that there is any, or there will be any, effect or adverse effect on Iranian economy because the new sanctions are limited to some areas, which are not much related to our economy,” he said.
He did not give a total reserves figure but said they stood at a record high. Asked if they were enough to cope with any major shocks, he added: “We can service our debt very well. Our debt-service ratio is very good and so there is no reason for us to worry about that at all.”
Sheibany had told Reuters in February that reserves amounted to “tens of billions of dollars”. He said one portion of the country’s foreign reserves, the Oil Stabilisation Fund, stood at $11 billion in February.
Iran has been steadily shifting its foreign reserves away from dollars into other currencies such as the euro, a move Sheibany said was partly a response to U.S. hostility towards Tehran.
“At the time being, because of American hostility towards Iran, we are distancing from dollar,” he said.
“In the future of course, it depends. We are diversifying our reserves in different currencies,” he added, when asked about the central bank’s long-term reserve allocation for dollars.
A state-run newspaper, called Iran, had said in December that central bank reports in previous years had indicated that dollars accounted for about 40% of Iran’s reserves. But the newspaper gave no specific dates for the figure cited.
Iran has been asking overseas buyers of its oil to pay in euros rather than dollars, a tactic that is being closely watched by foreign-exchange markets.
“That’s our policy and right now we are doing that,” Sheibany added. “I think that this is bad for America and the importers. As I say, I believe that they are shooting their own foot because they have international currency and they should take care of that. If not, we are shifting to other currencies.”
On the economic outlook, Sheibany said cutting public spending would reduce inflation.
“We believe that if we bring down the expenditure of government, we can control our inflation,” he said. “That is a source of inflation.” Iran is struggling with double-digit inflation and jobless rates as well as missing targets to expand oil production capacity, despite windfall gains from high crude prices.
“If we manage to bring down inflation to a lower level then there is no need to increase interest rates,” he said. “Now the policy of our government is either to decrease the interest rate or at least to keep it at the constant rate.”
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