TEHRAN Governor of Central Bank of Iran (CBI) Mohsen Nourbakhsh said on Monday that Iranian economy has high potential to absorb investment and create jobs.

He told a press conference that the government has deposited dlrs six to seven billion with the special reserve account adding that 50 percent of the fund will be channelled to grant loans to the private sector and to countries doing business with Iran.

He said that Iranian banks are studying applications from private sector seeking loans from the special reserve account for the projects to be carried out. The interest rate for the loans will be in concord with the international interest rates which are between seven to 8.5 percent, Nourbakhsh said.

On the exchange rates, Nourbakhsh said that the CBI will follow the policy of stabilizing exchange rates, protecting strength of national currency, boosting economic growth and economic development as well as moving toward uniform exchange rates and harnessing inflation.

Asked about possible change in interest rates the banks grants for the people's long-term deposits, he said that no decision as been made in this respect yet and the CBI will put forward a proposal to the national monetary and credit council regarding interest rates.

He said that the average interest rates for long-term deposits is 12.8 percent and taking into account the inflation and the fact that about six million people have deposits with banks, a fair interest should be paid for them.

Nourbakhsh appreciated the government's economic performance in the past year and said that continued presence of President Khatami in the next four years will be a positive factor to the best progress of the country's economic development.

He said that the gross domestic products (GDP) for the year 1379 had been predicted to increase by 4.5 percent in the Third Five-Year Development Plan (2000-2005) while the gdp enjoyed 5.9 percent growth in 1379 March 2000-2001), he said.

Nourbakhsh said that the inflation for the year 1379 had been predicted at 19.9 percent while it actually stood at 12.6 percent. The success was achieved due to sale of participation bonds to the public, he said.

Responding to a question about setting up private banks, he said that the CBI has agreed to setting up two private banks adding that if they succeeded in increasing their capitals, they would receive permission to start functioning.

He said that the CBI is currently studying an application from a foreign bank to set up branches in Iranian free trade zones (IFTZs).

Nourbakhsh said that the government is currently paying its debts to domestic banking system to enable the banks to grant loans for the private applicants involved in different businesses.

(IRNA)