The government plans to issue bonds worth 400 trillion rials ($ 13.2 billion) to cover its debts, a measure which is included in the next year’s budget bill and the sixth development plan (2016-21), Masoud Nili, senior economic advisor to President Hassan Rouhani said Sunday.
"Iran’s economy will be able to achieve a growth rate of 6% in 2016-17," he said addressing a conference on the opportunities for the private sector post sanctions, IRNA reported.
He stressed the need for utilizing private sector potential and reconnecting to the outside world as the international sanctions ease.
“By next year (starts March 20) one million barrels will be added to Iran’s oil production capacity,” he said. ''The expected surge in oil production will add 30-35% to the oil sector’s added value and increase GDP by 2.5-3%."
The prominent economist pointed to the sharp plunge in global crude prices saying the falling revenues will pose serious challenges for the government’s spending program in the coming fiscal year.
“Crude exports will increase in the coming year, but this will not be of much help to the government because oil prices are expected to continue on the lower side throughout the next year,” he added.
In the past 18 months oil prices have fallen by 75%, from $110 a barrel to below $30. This has taken a hit on the countries whose budgets are tied to the oil barrel.
Foreign Trade
“Next year we will have a 10% increase in the volume of foreign trade and the cost of money for domestic banks will also decline,” Nili said. These two factors can help mitigate the credit crunch to some extent while giving the private sector an opportunity to rise to the occasion and assume a more active role in the economy.
"Our most important problem for now is lack of finance and the money crunch besetting the banking sector.”
Iran’s trade with the outside world declined sharply in the years of economic sanctions. The cost of money hiked as Iranian banks were not allowed access to the international system for inter-bank transactions, SWIFT.
“The coming year will be a difficult financial year for the government but a good one for the country’s public mood. The private sector can expand its interaction with the world," he said, pointing to the new and promising era after the embargo ends.
The sanctions against Iran were “effective” but not “successful”, according to the senior economist. He recalled that Iran’s economy has always faced hurdles caused by a variety of factors "of which sanctions was one."
He singled out structural problems as the primary factor contributing to the dire straits. “Structural problems existed even before the sanctions hit and will stay in place. We didn’t have a strong private sector and a balanced budget and we lack them still,” Nili told the conferees.
The second factor, he noted, is the plethora of “harmful policies" of the former administration. "These wrong policies hurt the country’s economic potential and infrastructure.”
Sanctions and the plummeting oil prices are the other negative factors that hurled the national economy in the red, according to Nili.
It was rather strange that the respected economist did not mention the destructive role of the cash subsidies that cost the government more than $13 billion a year.
The monthly payment of 450,000 rials ($12.5) to an estimated 74 million Iranians has become a nightmare for the administration that is under immense pressure to dole out $1.1 billion every month.
