Bloomberg | Golnar Motevalli: The Head of Iran’s central bank, Abdolnaser Hemmati, provided written answers to questions from Bloomberg about the Islamic Republic’s request for around $5 billion in loans from the International Monetary Fund to help it keep its economy afloat as it grapples with a major outbreak of the coronavirus.
Q: Can you give the latest developments on your recent request for financing from the IMF?
A: This is not recent and I believe we were among the first countries who requested support through a Rapid Financing Instrument (RFI) on March 6, 2020, more than 40 days ago. Remember, we were among the first five countries who were hit hard by the coronavirus and when the Managing Director of the IMF announced that the IMF is ready to help countries using the RFI ,we, as one of the member countries, submitted our request to access this facility.
Q: The U.S. has said it will block the application and is opposed to the request. What’s your response to the U.S. government position?
A: We have not asked the United Sates for help! We have asked the IMF for support: an international, apolitical institution affiliated with the UN, and for which, we were one of the founder members and contributors over the past 75 years. The United States is a member of the IMF as all 190 or so other countries. The last time I checked, the United States is not running the IMF, but it’s management and the Board of Governors who oversee the work and ensure that the IMF delivers on its mandate. But I would like to repeat that all UN organizations, say the IMF or WHO, should stay away from politics and deliver on their institutional mandates.
A: Let me answer your question by looking at the conditions for the RFI’s eligibility and then address your concerns. According to the IMF, the RFI is designed to help a member country with immediate financial support once the country is faced with an exogenous shock that opens a financing gap in the Balance of Payments. The IMF then would like to ensure that the country is able to repay the Fund and the country’s public debt is sustainable, these are all good. In our case, we were faced with a negative exogenous shock when the coronavirus hit us. Our estimates show that to contain the spread of the virus, strengthen our healthcare system and protect the frontline personnel in hospitals and elsewhere, and help our people who have lost their jobs, we would need an additional 10 billion euros in our external financing, this is about 2% of our GDP. This is an established fact and we have shared this information with the IMF. Obviously, we have more than enough foreign reserves to cover this shortfall, but the unilateral U.S. sanctions has limited our access. If they want us to use our own resources rather than IMF’s facilities, why don’t they listen to many voices in the US congress and ease the sanctions?
On the second point, we have enough reserves to repay the IMF, through channels that we have already used to pay our contributions to the IMF during these many years. And lastly, our public debt is also well below the threshold that is perceived to be sustainable for emerging economies. These are facts and I am confident that the IMF staff knows well.
In terms of how we will use this loan, I have already communicated to the IMF’s management, that the INSTEX and SHTA are readily available vehicles. These are specifically designed to help us import food and medicine. These channels have proper safeguarding mechanisms in place to address all concerns, if any. Besides, this is a good chance to activate these channels as many European countries such as France, Germany, Italy and Spain are trying to activate.
Q: How realistic are you about getting the loan? What will you do if the IMF rejects the request?
Q: You mention that Iran has foreign reserves to cover the shortfall. Is that money that is frozen overseas because of sanctions? Are you calling on the U.S. to allow those reserves to be diverted into the Swiss payment vehicle and INSTEX?
A: Yes, as you know well, Central Bank reserves are under U.S. sanctions overseas, which is illegal and unilateral, and I want to be clear about this. What we are saying is that the sanctions should be lifted altogether, however, sadly, there are actors in the U.S. government that have little regards for international law and order. The U.S. treasury has declared the Swiss channel as a vehicle for humanitarian purposes, the INSTEX is also designed for importing food and medicine, if the U.S. is honest about its claims, we should also be able to use our own reserves in these two channels.
Q: How much money does Iran have frozen in overseas accounts because of sanctions?
A: We publish our reserves figures in our Balance of Payments accounts, the numbers are in line with what we had over the past few years.
Q: What is the breakdown of your IMF request? How much is it money that Iran has paid into the Fund and how much is a loan?
A: There is no such breakdown. The IMF is like a credit union, member countries contribute to it over the years in a hope that the IMF would provide them and other countries loans when they need. In line with IMF regulations and access limits, we have requested about 3.6 billion SDR [Standard Drawing Rights] in the form of RFI; this equals to 100% of our quota at the IMF, and it should come from the pool of resources that the IMF has put together to fight the recent coronavirus crisis.