Allameh Tabataba’i University Strategic Recommendations for  Administrative Bodies

Allameh Tabataba’i University Strategic Recommendations for Administrative Bodies

Islamic Foundations for the Necessity of Reforming the Central Bank Law in the Direction of Enhancing Independence and Reform Proposals for the Relevant Law

Author
Department of Business Economics, Allameh Tabataba'i University
Abstract
The independence of the central bank in Iran's monetary system, particularly from the perspective of Islamic foundations, is regarded as a fundamental prerequisite for curbing inflation, safeguarding the value of money, and consequently guaranteeing economic justice. Preserving the value of money in this framework is considered not merely an economic objective, but a religious and contractual commitment justifiable on the basis of the teachings of fidelity to covenants and jurisprudential rules such as "no harm" (la darar) and "destruction" (itlaf). Inflation and expansionary monetary policies, in addition to undermining the function of money as a standard of value, result in the unjust transfer of wealth in favor of capital holders and to the detriment of wage-earning and low-income strata, thus being incompatible with the requirements of Islamic justice. Within this framework, the primary criticisms directed at the draft of the new Central Bank bill include the multiplicity of objectives, the structural dependence of the central bank on the government (including the government's role as a banker), the complete governmental nature of the General Assembly, the weak mechanism for appointing the Governor, and the reduction of the Jurisprudential Council to a consultative and low-impact institution. Reform strategies emphasize defining a single primary objective for the central bank (general price level stabilization and preserving the value of money), increasing institutional independence through the redesign of the General Assembly with the presence of representatives from the three branches of government, reforming the Governor's appointment process, establishing a Treasury Bank to separate the government's banking functions, officially recognizing electronic money, and elevating the status of the Jurisprudential Council and Sharia supervision as a binding pillar within the banking system.
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