Economy, Business And Markets

IMF Reports Surge in Iran Forex Reserves

IMF Reports Surge in Iran Forex Reserves IMF Reports Surge in Iran Forex Reserves

The International Monetary Fund (IMF) has reported a significant rise in Iran’s foreign exchange reserve.

In its latest World Economic Outlook report, the IMF said the Iranian reserves rose by 14.3 billion dollars in 2015, registering a record of 125.9 billion dollars.

It added however that the reserve could slightly slim and settle at $125.6 billion this year.

Similarly, the international financial organization forecasted the country’s gross domestic product (GDP) to hover around $386 billion in 2016 from last year’s $387.7 billion.

The report, which projected the world economy to gain 3.5% in 2016, forecasted a 4% growth for the Iranian economy, compared to its last year announcement of zero percent.

The IMF also estimated Iran’s double-digit inflation rate of nearly 12% to lower and reach 8.9% throughout this year.

It said a prolonged period of slow growth has left the global economy more exposed to negative shocks and raised the risk that the world will slide into stagnation.

The monetary organization had earlier cut its combined growth projection for oil-exporting countries to 2.9% this year from a forecast of 3.8% in October.

It said the Saudi economy would only grow by 1.2% in 2016, the lowest in seven years, and by 1.9 % next year.

The grim forecast for the Saudi economy comes despite the austerity measures taken by the Persian Gulf oil kingdom to cut spending and boost non-oil revenues after posting a record budget deficit of $98 billion last year.

  World Bank Foot-Dragging

Meanwhile a report by AFP shows that despite the easing of sanctions against Tehran and the country’s pressing economic needs, the World Bank seems reluctant to reengage in Iran’s projects.

Since sanctions were removed in January in the wake of a nuclear deal between Iran and world powers, the Washington-based development bank has not shifted.

“We’re following the situation very closely ... we don’t have any specific plans yet,” said World Bank President Jim Yong Kim.

Iranian authorities haven’t made any requests to the bank for help.

But the reasons for the bank’s reticence can be found elsewhere -- at the intersection of the economy and geopolitics and the desire not to offend the United States.

The United States, the largest World Bank shareholder, and the primary supporter of Kim, an American, sends mixed signals on just what is acceptable in doing business with Iran.

Crucially, while sanctions tied to Iran’s nuclear program were lifted, US sanctions applied for Tehran’s alleged support for terrorism and human rights violations remain in place.

  Seeking Alternatives

In theory, those remaining sanctions don’t prevent the World Bank or other international financial institutions to engage with Iran, a spokeswoman for the US Treasury told AFP.

But, she added, the US representative at the bank has other constraints.

“Current legislative mandates direct the United States executive director to vote against World Bank loans to Iran,” she said, referring to US Republican-led Congress’s hostility toward Tehran.

Iran’s central bank governor recently pointed to the reticence of European banks to engage with the country in fear of falling afoul of US sanctions.

“They have been asked not to work with Iranian banks, and they’re afraid,” Valiollah Seif said at a forum in Washington.

One consequence is that Iran has started turning away from the West-dominated World Bank toward alternatives.

Iran is one of the founding members of the China-led Asian Infrastructure Investment Bank and is seeking to join the New Development Bank backed by the BRICS nations of Brazil, Russia, India, China and South Africa.