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Iran's outgoing central bank governor warned on Monday that the government's economic policy amounted to a "mirage," in a speech at a handover ceremony, the labour news agency ILNA reported. It said the ceremony was attended by President Mahmoud Ahmadinejad. "Creating employment by injecting money into (the economy) is a mirage. We must seek the water and not a mirage," Tahmasb Mazaheri was quoted as saying.
"A mirage drains the thirsty person's remaining power in seeking water." Ahmadinejad's policy is based on a massive infusion of petrodollars into the economy in order to create jobs. "A mirage gives rosy hopes which are hollow," Mazaheri cautioned. Mazaheri emphasised the "scientific and logical links between different economic parameters, between inflation and liquidity, and bank interest and inflation."
"We must be cautious of those who challenge these scientific and logical links," he added, criticising his opponents within the government, without giving names. Mazaheri was echoing remarks by former economy minister Davoud Danesh Jafari, who in April criticised the lack of economic expertise behind the government's plans.
For several months, a dispute has been brewing between Mazaheri and the labour ministry over financial policy. Mazaheri was in favour of liberalising bank rates in addition to strict controls on loans to reduce inflation, which has risen to more than 27 percent over the past 12 months. Labour Minister Mohammad Jahromi, who emerged victorious, advocates an injection of cash into the economy in order to create jobs, despite criticism from many economists of the president's policies. Mazaheri was replaced as governor last month by the central bank's secretary general, Mahmoud Bahman.

Copyright Agence France-Presse, 2008

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