Iran's new central bank governor said he would inject $15 billion (Dh55.1bn) into the banking system to help them boost industrial production, a move economists have warned will stoke surging inflation.

Governor Mahmoud Bahmani said the funds would come from an oil reserve fund and by helping to boost production would ease price rises, echoing the government's line.

Analysts said Tahmasb Mazaheri was replaced as governor last week because he was seeking to tighten credit to curb inflation running at 27 per cent, while the government was pushing for looser policy partly ahead of the June 2009 presidential vote.

"Many experts, including me, are staunch critics of withdrawing money from the Oil Stabilisation Fund [OSF], but it should be noted that withdrawing money from this account to strengthen production is fully in line with the aim of this account," Bahmani told Hambastegi newspaper.

The OSF was set up as a fund to capture extra oil revenues when prices soar, as they have done in recent years, to provide a cushion when oil prices are low or to fund development projects.

Hambastegi reported that Bahmani said he wanted to withdraw $15bn from the fund to help support the banking system, which the government has been arguing should be lending more to productive projects that could, in turn, create more jobs. It did not say over what period he planned to withdraw the cash from the fund, which according to a lawmaker held only $7bn.

Lawmakers have complained that the fund should now hold much more cash as oil prices, now hovering around $100 a barrel, are far higher than the price set in the budget. A former central banker has said Mazaheri should have loosened credit at least a little to help cash-starved industries.

Hambastegi said Mazaheri was expected to join the Expediency Council, which arbitrates between parliament and an Islamic oversight body.