Statement by IMF Article IV Mission to the Islamic Republic
Press Release by
International Monetary Fund (IMF)
International Monetary Fund (IMF) mission led by Mr. Dominique Guillaume visited
the Islamic Republic of Iran from May 28 to June 9, 2011 to conduct discussions
for the Article IV Consultation. Article IV Consultations are an important part
of the IMF's regular surveillance activity with all member countries and are
usually conducted every year. At the conclusion of the visit, the mission issued
the following statement:
"The mission reviewed recent economic developments and revised
its macroeconomic estimates and projections in light of new data and discussions
with the authorities. Real GDP growth recovered to an estimated 3.5 percent in
2009/10 despite the drop in oil prices, reflecting strong non-oil growth and an
exceptional agriculture crop. The positive growth momentum continued in 2010/11.
The authorities' monetary policy successfully brought down annual average
inflation from 25.4 percent in 2008/09 to 12.4 percent in 2010/11. Gross
external reserves also remain comfortable with improved prospects for the
external sector on the back of higher oil prices.
"The mission commended the authorities for the early success
in the implementation of their ambitious subsidy reform program. The increases
in prices of energy products, public transport, wheat, and bread adopted on
December 19, 2010, are estimated to have removed close to US$60 billion (about
15 percent of GDP) in annual implicit subsidies to products. At the same time,
the redistribution of the revenues arising from the price increases to
households as cash transfers has been effective in reducing inequalities,
improving living standards, and supporting domestic demand in the economy. The
energy price increases are already leading to a decline in excessive domestic
energy consumption and related energy waste. While the subsidy reform is
expected to result in a transitory slowdown in economic growth and temporary
increase in the inflation rate, it should considerably improve Iran's medium
term outlook by rationalizing domestic energy use, increasing export revenues,
strengthening overall competitiveness, and bringing economic activity in Iran
closer to its full potential.
"The authorities have been successful in containing the
initial impact of the energy price increases on inflation. Despite the very
large price increases of up to 20 times, consumer price inflation has only
increased from 10.1 percent in December to 14.2 percent at end-May 2011.
Maintaining macroeconomic stability in the near term through coordinated and
adequately tightened monetary and fiscal policies is essential to preserve the
benefits of the subsidy reform. Equally challenging will be the restructuring of
enterprises through the adoption of more energy-efficient technologies, and the
broader reorientation of the economy towards less energy-intensive products and
services, and production technologies. The authorities should actively pursue
their efforts to improve the business environment to support the creation of new
enterprises and jobs.
"The mission also reviewed developments in Iran's financial
sector, which has been a key driver of economic growth. Iran has the largest
Islamic financial sector in the world, with a deep banking sector, and rapidly
growing financial markets. The recent strong performance of the stock market
largely reflects high international commodity prices and Iran's large-scale
privatization program, which has contributed to the development of a
shareholding culture. The mission underscored the importance of the ongoing
banking sector reform program embodied in the 5th Five-Year
Development Plan to strengthen the soundness of the financial sector.
"The mission team would like to thank the Iranian authorities
for their hospitality, as well as constructive and open discussions."
... Payvand News - 06/14/11 ... --