I.M.F. study details perils of Iranian economy

The International Monetary Fund issued a sobering appraisal of Iran’s economy on Wednesday, warning that the impact of the West’s antinuclear sanctions had left the country vulnerable to anemic growth and rampant inflation that require urgent attention.

The I.M.F. appraisal was the organization’s first on-the-ground assessment of the Iranian economy in nearly three years. It was issued as Iran is seeking to undo the Western sanctions through negotiations on its disputed nuclear program.

A temporary agreement reached in November and put into effect last month provided some limited sanctions relief to Iran. But the basic restraints remain in force, and they have limited Iran’s ability to sell oil, its most important export, and have largely paralyzed its ability to conduct international financial transactions electronically.

“Large shocks and weak macroeconomic management over the past several years have had a significant impact on macroeconomic stability and growth,” Martin Cerisola, the I.M.F. assistant director for its Middle East and Central Asia department, said in a statement on the I.M.F. website.

Mr. Cerisola said difficulties with the Iranian government’s attempts to reduce subsidies for fuel and food, inadequately funded social programs and “a marked deterioration in the external environment stemming from the intensification of trade and financial sanctions, have weakened the economy.”

“Inflation and unemployment are high, while the corporate and banking sectors show signs of weakness,” he said. “These shocks have exposed structural weaknesses in the economy and in the policy framework.”

Mr. Cerisola, who led a delegation to Tehran from Jan. 25 to Feb. 8, said that the authorities in the administration of President Hassan Rouhani, which took over last summer, “are well aware of these challenges and the need to advance reforms, and have begun the preparatory work in many of these areas.”

He said a more comprehensive Iran report would be prepared by late March.

To some sanctions advocates, the I.M.F. assessment suggested that the effects of the temporary agreement to ease sanctions reached last November in Geneva may have helped to stabilize the economy. Mr. Cerisola said the I.M.F. expected the economy to grow 1 percent to 2 percent this year after having declined in 2012 and 2013.

“I actually think Iran’s economy has stabilized and is on a path to a modest albeit fragile recovery due in no small part to sanctions relief and shifts in market psychology as a result of the Geneva agreement,” Mark Dubowitz, executive director of Foundation for Defense of Democracies, a Washington-based group that supports more sanctions, said in an email.

Mr. Cerisola’s statement said the inflation rate had fallen from a 45 percent annualized rate in July to below 30 percent as of last December, partly because the currency, the rial, had stabilized after a prolonged decline. Still, it said, “external shocks” could undermine the rial’s stability. The statement also said that while the economic outlook may have improved partly because of the temporary nuclear agreement and the plans for negotiations on a permanent agreement, the prospects for Iran’s economy “still remain highly uncertain.”

The I.M.F.’s tone contrasted sharply with the optimism about the economy espoused by Iran’s government, which has contended that the temporary agreement on the nuclear issue had caused fatal fractures in the regimen of Western sanctions and that they would eventually collapse.

The official news media in Iran has reported on revived foreign business interest in trade and investment with Iran, particularly regarding a delegation from France last week. The Obama administration has sought to blunt that message. On Tuesday, President Obama, in the most pointed reminder yet, said the United States would come down “like a ton of bricks” on sanctions evaders. He issued the warning while hosting France’s president, François Hollande, in Washington.

The Obama administration also has expressed annoyance over news reports that Russia may be negotiating a deal with Iran to trade goods for $1.5 billion worth of Iranian oil per month, which would substantially increase Iran’s oil exports. American officials have said such a deal would violate sanctions and undermine the negotiations.

By The New York Times 

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