IMF hails Iran recovery, calls for bank reform

DUBAI: Iran’s economy is starting to recover more rapidly from years of international sanctions but the country urgently needs to shore up its banks, a senior International Monetary Fund official said yesterday.

Gross domestic product growth soared to 12.5 percent in the year through last March 20, but that was almost entirely due to a leap in oil exports, after most sanctions were removed under a deal with world powers on Tehran’s nuclear program. Oil exports are no longer growing nearly as fast. But the economic recovery is now beginning to extend to non-oil areas, said Catriona Purfield, head of an IMF team which held annual consultations with the Iranian government this month.

“Growth has begun to broaden to the non-oil sector,” Purfield said in a statement, predicting GDP would expand 4.2 percent in the current fiscal year and that growth could rise towards 4.5 percent in subsequent years with financial reforms. Official statistics in Iran are often incomplete and released only slowly, and the policy-making process can be opaque, so Iran’s consultations with the IMF provide one of the clearest glimpses into its economy.

The country’s recovery has been slowed by tensions with the United States, where President Donald Trump has raised the possibility that sanctions could be reimposed or new sanctions introduced. This has deterred many banks and other foreign companies from operating in Iran.

Purfield said that given such uncertainty and the increasing vulnerability of Iran’s financial system, the government urgently needed to restructure and recapitalize banks and credit institutions.

“An asset quality review, related-party lending assessment, and a time-bound action plan to recapitalize banks and address non-performing loans should start immediately,” she said, adding that the cost of recapitalizing banks could be covered with long-term government bond issues.—Reuters