Iran’s economy is starting to recover more rapidly from years of international sanctions but the country urgently needs to shore up its banks, a senior International Monetary Fund official told Reuters on December 18.
Economic growth leapt to 12.5% in the Persian calendar year that ended on March 20, but almost completely driving that were huge gains in oil exports, made possible after most international sanctions against Iran were lifted under the late 2015 deal to curb the country’s nuclear program.
The IMF has noted that oil exports are no longer growing nearly as fast but that Iranian non-oil spheres are beginning to feel the economic recovery.
Catriona Purfield, head of an IMF team which held annual consultations with the Iranian government this month, reportedly said: “Growth has begun to broaden to the non-oil sector.” She predicted GDP would expand 4.2% in the current fiscal year and that growth could rise toward 4.5%, provided financial reforms are put in place.
Purfield also told the news service that given the uncertainty being caused by the stance taken towards Iran by the Trump White House with its threats of restoring heavy sanctions, and the rising vulnerability of Iran’s financial system, Tehran urgently needed to restructure and recapitalise banks and credit institutions.
“An asset quality review, related-party lending assessment, and a time-bound action plan to recapitalise banks and address non-performing loans should start immediately,” she was quoted as saying, adding that the cost of recapitalising banks could be covered with long-term government bond issues.
Iran’s central bank has been intervening in the foreign exchange market to bolster the Iranian rial given the international turbulence. But the IMF has pressed the regulator to let exchange rates move more freely and to abolish the dual system of official and market rates. This would prevent Iran’s foreign reserves from running down and make the economy more competitive, it says.
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