IMF warns Iran not to rely on oil revenues to boost economy

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Radio Free Europe / Radio Liberty

A top International Monetary Fund official warned Iran not to count on a big jump in oil revenue to boost its economy, but said it should seek other opportunities to re-engage with the global economy.

“I speak here today at a pivotal moment for Iran’s economy,” said IMF Deputy Managing Director David Lipton in a speech at the Central Bank of Iran on May 17 during a two-day visit to Tehran.

“With important sanctions lifted, your country has a new opportunity to deepen its integration into the global economy. That process has the potential over time to support faster growth and rising living standards for Iranians.”

An oil-export facility at Khark Island, Iran.
An oil-export facility at Khark Island, Iran.

Since sanctions were lifted in January, Iran has dramatically increased its oil output to close to 4 million barrels a day, the level it produced before sanctions, from as low as 1 million barrels when it was under sanctions.

While that is helping to infuse some cash into Iran’s economy, Lipton said low oil prices, which have fallen from over $100 a barrel in 2014 to around $47 recently, will limit the gains for Iran’s economy and budget revenues.

He emphasized that sustainable growth and job creation in the future will depend on sectors other than oil.

Lipton praised reforms carried out in recent years that had slashed inflation and put the country on a growth path even before sanctions were lifted.

He encouraged Iran to follow the example of China and countries in Latin America and Eastern Europe, which pursued even more ambitious free-market reforms to open up and diversify their economies as they strived to rejoin the global economy after long periods of isolation.

Lipton acknowledged that Iran faces serious obstacles and challenges besides low oil prices, including the sluggish global economy, investor wariness about risks in the Islamic republic, a weak banking system, and the need for budget reform.

Perhaps the biggest obstacle is the tough U.S. restrictions on financial transactions with Iran that remain in place because of Iran’s state sponsorship of terrorism and poor record on human rights.

Lipton said that if those restrictions are ever to be lifted, Tehran must take action to stop money laundering and terror financing.

“The Iranian authorities have made recent progress in establishing a framework aimed at combating money laundering and the financing of terrorism,” he said. “This is a critical element for reconnecting with the international financial system. The IMF will continue to support the Iranian authorities’ efforts in this area.”

The IMF does not have a formal program in Iran, but has been providing informal advice and technical assistance.

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