The International Monetary Fund (IMF) is an international famous financial organization headquartered in Washington D.C. Many of the countries and investors consider this organization’s economic and financial report as one of the most important and valuable criterion for their investment and cooperation with other countries. This organization published a report on October 3, 2016 about Iran which discuss about Iran’s economic conditions after more than a year from implantation of JCPOA. A team from IMF had a visit from Iran and they have met some of the major authorities such as Central Bank of Iran, government officials of INTA, the Management and Planning Office and other governmental agencies. After this visit, they released their preliminary findings as a Concluding Statement at the end of an official staff visit (which they call mission). In this article we try to review this report and some of the suggestions they provided for Iran’s economy.
In the first part of the report, there is a brief statement about Iran’s current economic factors. It claims that Economic conditions are improving substantially during 2016/17. Real GDP rebounded strongly over the first half of the year as sanctions lifted after post-JCPOA implementation. Oil production and exports rebounded quickly to pre-sanction levels which help to compensate the impact of low global oil prices. Increased activity in agriculture, auto production, trade and transport services has led to recovery in growth of non-oil sector. Real GDP is projected to grow at least by 4.5 percent in 2016/17. The prudent monetary and fiscal policies adopted in recent years, along with favorable international food prices, allowed CPI inflation to decline to a low of 6.8 percent (y/y, point-to-point) in June 2016. Although point-to-point inflation has risen to 9.5 percent in September, IMF estimates that inflation will reach to average of 9.2 percent in 2016/17.
IMF also reported that The government is implementing far-reaching, ambitious reforms to support a sustained acceleration in growth.To anchor inflation over the medium-term, the authorities have proposed a fundamental reform of the monetary policy framework and plan to gradually reduce the non-oil fiscal deficit. They plan to clear government arrears, recapitalize banks and strengthen supervisory powers. New CFT laws have been passed and the government is committed to enhancing safeguards in the financial system to secure better access to the global financial system. IMF sees these reforms critical if Iran is to harness its re-integration into the global economy to spur growth and become a more market-based, diversified economy.
After considering the Iran’s economy circumstances, the mission raises some points to support the government’s reform efforts:
- Vulnerabilities are emerging that could erode Iran’s economic achievements.
- With economic activity recovering briskly, recalibrating monetary and fiscal policies at the margins will help keep inflation in single digits.
- Enhancing the ability of the central bank to safeguard price stability.
- Reducing fiscal dominance and creating space for bank recapitalization and public investment needs.
- Clearing government payment arrears and developing local debt markets.
- Fundamental overhaul of the banking system is needed to help unleash higher growth in the private sector.
- The proposed banking bill strengthens supervisory powers.
- Implementation of the FATF plan will bolster Iran’s AML/CFT framework and facilitate re-integration of domestic banks into the global financial system.
At the end of the report, they stated that Increased transparency and timeliness in the publication of data on key economic variables will facilitate international investors` interest in Iran and aid to develop debt markets.
The extended version of this report can be founded in IMF Official website. It seems that after recent report about the Iran’s economy by authentic and credible organizations like IMF, both domestic and foreign investors can hope that Iran’s gradually become a safe destination for investment, because governments are literally notice these reports and their recommendation in their development and reformation plans.