Islamic Republic of Iran and the IMF
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Statement on the IMF 2005 Article IV Consultation Mission to the Islamic Republic of Iran
An IMF mission led by Mr. Abdelali Jbili, Assistant Director in the Middle East and Central Asia Department, visited Tehran during December 3-10, 2005. The purpose of the mission was to hold the annual consultation discussions with the Iranian authorities. The mission reviewed recent economic developments in the Islamic Republic of Iran and discussed with the authorities their economic and financial policies.
The mission noted that the growth performance of the Iranian economy in fiscal year 2005/06 (Iranian year 1384) has remained strong and broad based, with real GDP projected to grow by 6 percent. Unemployment is estimated at 11 percent in the current year, and the external position has strengthened further on the back of high oil prices and rapid growth in non-oil exports. Inflation has declined from 15.2 percent to 13 percent, but remains high.
The mission welcomed the authorities' intention to continue the economic reforms envisaged in the Twenty-Year Vision and the current Five-Year Development Plan, including privatization of public enterprises, promotion of private sector activity, attraction of foreign direct investment, and financial sector reform. In this regard, the licensing of two private banks and three non-bank financial institutions as well as the upgrading of bank supervision are steps in the right direction. The mission encouraged the authorities to accelerate the preparation and implementation of reforms to enhance growth and employment creation. It stressed, in particular, the need for reforming subsidies and improving their targeting, including those on energy prices,which absorb sizable resources that could be used more efficiently.
The mission called on the authorities to give greater priority to reducing inflation, which can weaken long-term growth and affect the poor disproportionately, thereby undermining the authorities' objective of achieving economic and social justice. In this regard, moderating the pace of government spending out of oil resources would help contain liquidity growth and reduce the vulnerability of the economy to a possible downturn in oil prices. The authorities shared the mission's view regarding the need to contain the growth of government spending and reaffirmed their commitment to reducing inflation to a single-digit level, in line with the Fourth Five-Year Development Plan.
The mission welcomed the authorities' continued commitment to enhancing economic transparency, including through the publication of all IMF consultation reports, progress toward complying with the IMF's Special Data Dissemination Standards (SDDS), and publication of data on the website of the Central Bank of Iran. In this regard, the mission encouraged the authorities to complete the process of subscribing to SDDS by increasing the coverage and frequency of dissemination to the public of government finance statistics and international reserves. The mission thanked the authorities for their excellent cooperation.
IMF EXTERNAL RELATIONS DEPARTMENT