Central Bank of Iran Chief described Iran on Thursday as a country with unique geopolitical stance and a young and well-educated workforce that can have great potentials for the world economy.
Speaking at Euromoney Iran Conference in London, Valiollah Seif delineated the CBI's future plans to further stabilize the economy, saying "now we attach priority to reaching high and sustainable economic growth and creating job opportunities," emphasizing that to materialize economic potentials, Iran "highly welcomes" foreign investment.
Hinting at plans to liberalize the economy, Seif said the CBI is gradually shifting the conduct of monetary policy from a direct instrument framework to a market-based and indirect monetary policy framework.
"Another high priority measure of the CBI is implementation of exchange rate unification," he said, as reported by the CBI website. "We are also strengthening the central bank’s regulatory and supervisory powers and extending them to all shadow institutions outside our regulatory network and ensuring better risk management practices by banks."
Referring to the passage of anti-money laundering law by the parliament in March, he said "the enactment of the law as well as Counter Terrorist Financing measures will remove an important obstacle in the way of Iranian banks’ re-engagement with their foreign counterparts."
"We have requested an IMF assessment against the FATF standards, and intend to join the Eurasian AML/CFT group. We have, recently met the FATF board and thoroughly explained our regulatory system for the first time and received very positive feedback ever since."
In another part of his address, the CBI chief said, "[Iran] economy is endowed with vast mineral reserves, not the least of which is oil and gas and ranked 18 globally in GDP in PPP terms. The $1.4 trillion Iranian economy is diversified and enjoys a broad domestic industrial base,"
"Although its oil and gas reserves rank first in the world (according to BP), Iran's economic diversification makes its oil sector share less than 15% of GDP," he said.
Key Hurdles
While the lifting of most curbs after Iran's nuclear deal with world powers in January is luring some investors, most are staying away from the market of 80 million consumers as they remain doubtful of Iran’s ability to protect their investments. To win back their trust, Tehran has sent 50 policymakers and finance executives to meet their European counterparts at the first-ever Euromoney conference dedicated to the country.
The one-day meeting sought to facilitate a discussion on “the key hurdles and challenges to overcome in order for Iran to regain its position in the international banking and financial community,” according to the official website. Besides Seif, senior officials including Hassan Ghalibaf Asl, the chief executive officer of Tehran Stock Exchange, also spoke.
Highlighting the key achievements of the administration of President Hassan Rouhani that took power in 2013, Seif told the audience that "gross fixed capital formation, which declined by 23.8 and 6.9 %in 2012 and 2013 respectively, turned to 3.5 % positive in the year ending March 2015." He noted that GDP growth, which had continuous decline for 8 consecutive quarters, surged by 3 % in the FY ending March 2015.
"However, challenges related to external shocks from oil price declines lowered the GDP growth rate in the fourth quarter of the same year and is expected to have resulted in weaker growth performance in the year ending March 2016," he added.
Moral Obligations
Seif called upon the US & EU to take appropriate measures to ensure that the investments made in reaching the agreement on Iran nuclear program is not thrown away.
"There are moral obligations to reassure market participants of dealing with Iran. Iran needs to see the dividends of JCPOA in full,'' he said.
"While all nuclear-related sanctions on Iran have been lifted, the sanctions that fall outside the scope of the Joint Comprehensive Plan of Action remain in place. This has allegedly made major commercial banks around the world reluctant to engage with Iranian banks out of concern of becoming subject to penalties in case of inadvertent slippage in complying with US rules," he said.
Moreover, excessive financial sector regulations in advanced economies, as acknowledged by the IMF, have led many US and European banks to withdraw from several regions, including the Middle East, thereby creating a vacuum of much-needed correspondent banking network."
He said Iran on its part is ready to take all reasonable steps to mitigate the risks for willing counterparties to engage with the country. "Financially, Iran has the best track record in fulfilling its obligations, even during the difficult times of revolution, war and sanctions."
"Politically, Iran is a stable country and a vibrant society in a turbulent neighborhood. Media, pro-war lobby groups and political propaganda have distorted Iran’s’ image. I urge you to come and see for yourself. Then you will feel the difference," he said.
