“Fixed interest runs counter to Islamic banking”

Iranian president Mahmoud Ahmadinejad is against a usury based lending system saying that fixed interest is usury and is against the country’s banking laws.

“Fixed bank interest rate is usury and is described as illegal. Bank interest is largely planned to be a function of economic circle,” The president told a news conference on Monday.

Article 21 of the Law on Usury Free Banking Operations rules out usury in the country’s banking system. The article reads: In its dealings with other banks, Central Bank of the Islamic Republic of Iran is not authorized to engage in banking operations which involves usury; nor are the banks among themselves.

The president added that the government is “determined to take the necessary steps to keep interest rates at single rate levels. We are planning fiscal disciplines to stick to this plan.”

Further to banking reform plans, Ahmadinejad said the tenth government would decrease unemployment to below 7 percent by pursuing its economic reform plan.

“Despite a global economic downturn and sanction challenges, we will manage to cut the unemployment rate to less than 7 percent during this presidential term,” Ahmadinejad said.

The official rates for unemployment in 2009 stand at just over 12%. The figures for youth under 30, especially females, is significantly higher.

The Iranian president also stressed that the cabinet under his previous term of presidency had succeeded in containing inflation despite two serious crises – a global economic meltdown and unprecedented sanctions against the country.

According to the central bank, Iran’s inflation rate fro 2008 was 24.3%.