Iran can live for the moment on the fat generated by previous healthy oil prices, but a fall-off in growth caused by the present market slump will hit the government's job creation program in the long term, analysts said Monday, November 19.
Oil exports account for some 80 percent of Iran's foreign currency revenues, and brought in $24 billion in the Iranian year ending March 20, as against $11 billion forecast in the budget. Half the difference, or $6.5 billion, was paid into a special fund set up to aid exporters of non-oil products, with the rest being deposited in the central bank, building its cushion against an economic rainy day to some nine billion dollars.
More than half-way through the current financial year, Iran is still expected to end up with a healthy surplus next March, having again deliberately underestimated its oil revenue at $12.8 billion.
"Even with the fall in prices, and a barrel of oil bringing in only $16 or $17, revenue should reach $16 billion," one oil expert said. "But in the years to come budget forecasts will have to be revised."
The expert recalled that in 1999 Iran had based its budget on oil at $17 a barrel, only to see it fall to half that amount. The result was severe economic problems and social unrest, including student demonstrations.
"The Iranians have learned their lesson and are prepared for such developments," he added. Heavy industry, including automobile construction, the development of the country's huge gas reserves, and the service sector, are not expected to be affected, experts say.
With no plans to spend its way out of recession, having failed to boost consumption under former president Ali Akbar Hashemi Rafsanjani, Iran is also bringing inflation under control, central bank officials say. Inflation was officially 12.6 percent in the year to last March -- though more than 20 percent according to analysts -- but is now down to around 11.8 percent, according to bank figures.
Warning lights are flashing however on the employment front, with forecast growth of six percent this year now likely to fall to 5.5 percent. The result is likely to be the creation of only some 400,000 jobs against 750,000 planned by the reformist government of President Mohammad Khatami.
The unemployment problem is crucial for Khatami, whose power base is Iran's overwhelmingly young electorate, many of whom are jobless. The government also faces a key decision in March 2002, when it has pledged to free up the exchange rate of the Rial, the national currency, ahead of entering the World Trade Organization.
At present there is an official fixed rate of 7,900 rials to the dollar, which has stayed the same for two years, and a floating rate which among other things determines the amount of subsidies on essential items. The focus of these subsidies will be switched from products to people, in order to aid directly the 20 million Iranians, or one third of the population, living below the official poverty line of some $160 per month at the official rate.
Paradoxically, one result will be a rise in the price of petrol (gasoline) at the pump, which at present costs just 450 rials a litre. — (AFP, Tehran)
by Jean-Michel Cadiot.
© Agence France Presse 2001
© 2001 Mena Report (www.menareport.com)
