IMF cautions Iran over economic policies, “overheated” economy
Washington, 15 August (IranVNC)—The International Monetary Fund [IMF] said in a report released yesterday that international sanctions against Iran have “negatively affected” its economy, and cautioned the country over its medium-term economic prospects and an “overheated” economy.
By: IranVNC
Published: Friday, August 15, 2008
11:24GMT—7:24AM/EST
IRAN – ECONOMY – IMF
Washington, 15 August (IranVNC)—The International Monetary Fund [IMF] said in a report released yesterday that international sanctions against Iran have “negatively affected” its economy, and cautioned the country over its medium-term economic prospects and an “overheated” economy.
In the report, entitled “Islamic Republic of Iran: 2008 Article IV Consultation”, the Washington-based IMF says: “UN and U.S. sanctions against certain Iranian institutions have created difficulties for trade financing and payments, discouraged foreign investment, and adversely affected the profitability of the targeted financial institutions.”
Iran has faced three rounds of United Nations Security Council sanctions over its controversial nuclear program, and the U.S. and European Union have placed their own sanctions against that country. The U.S., Britain, France and Germany are considering additional sanctions against Iran that would go beyond existing UN sanctions.
On Tuesday, the U.S. blacklisted five more Iranian entities for their alleged ties with Iran’s nuclear and missile programs. That same day, Iran’s Supreme Leader Ayatollah Ali Khamenei said that sanctions and threats against Iran have “benefitted” the country, the semi-official ISNA news agency reports.
Although the body says Iran’s short-term growth prospects are good, it advises that medium-term prospects are “very sensitive” to oil prices. While Iran had the second largest proven oil and gas reserves and was the fourth largest oil producer in 2006, “its oil production has remained virtually flat in recent years and will most likely remain stagnate in the medium term due to insufficient investment.”
Citing British Petroleum [BP] figures from June 2007, the IMF reports that Iran’s proven oil reserves stand at 137.5 billion barrels, while its daily production is 4.4 million barrels. In comparison, Russia, with 79.5 billion barrels of oil reserves, produces 9.8 million barrels per day.
Inflationary pressures are another challenge Iran faces, which the IMF reports to be 24.2 percent in April 2008. To lower inflation, the IMF recommends Iran “significantly” tighten its macroeconomic policies, including a reduction in budgetary expenditures and an increase in banking rates of return.
“The recent rise in inflation suggests that the economy is overheated and the persistence of high unemployment indicates that expansionary policies only have a temporary positive effect on employment creation against the background of uneven progress on structural reforms.”
The head of Iran’s Central Bank, Tahmasb Mazaheri, announced on 9 August that Iran is considering a plan to change its monetary denominations to combat high inflation, which the Central Bank has put at 21.5% annually. The examination period will conclude in two to three years, he said.
Iranian President Mahmoud Ahmadinejad has faced a new string of criticism in recent days over his economic policies. On Tuesday, the head of the Expediency Council, Ayatollah Akbar Rafsanjani, blamed economic woes on an increase in government interference in the economy. Last week, Majlis [parliament] speaker, Ali Larijani, said that government officials should not propose ideological issues to solve economic matters. Tehran’s interim Friday prayer leader, Ayatollah Mohammad Emami-Kashani, said last Friday that Iran’s economy “is really sick”.
Sources: International Monetary Fund website, ISNA in Persian
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