WASHINGTON: The International Monetary Fund said on Monday that there has been a rebound in economic activity and a decline in inflation in Iran.

An IMF team, led by Martin Cerisola, Assistant Director for the Middle East and Central Asia Department, visited Tehran from Jan 24 to Feb 5. The team held discussions with the authorities on recent developments in the Iranian economy, the near-term outlook, and on their macroeconomic policies and reforms agenda.

At the conclusion of the mission, Mr Cerisola said that discussions with the Iranian authorities took place against the background of “a marked improvement in macroeconomic conditions over the past year, with a rebound in economic activity and a decline in inflation.”

But he warned that “the sharp drop in global oil prices and an uncertain external environment will bring significant challenges to the outlook.”

He said that the Iranian authorities recognised these challenges and remained determined to sustain the improvements in macroeconomic conditions.

The team’s discussions with Iran focused on the policies needed for preserving disinflation gains and for supporting the economy in its adjustment to lower oil prices.

For this, the IMF team recommended that fiscal policy should aim at limiting the budget deficit in the next fiscal year to around 2.5 per cent of the GDP.

Monetary policy should continue to aim at keeping inflation expectations anchored, by preemptively targeting liquidity growth at prudent levels.

“This policy mix would help absorb shocks and provide more room for credit to flow to the economy,” Mr Cerisola said.

The IMF-Iran discussions also focused on the need for pressing ahead reforms and the authorities’ plans in the banking sector to address nonperforming loans and strengthening the efficiency of financial intermediation.

The IMF mission met senior officials of the Central Bank of Iran and Ministry of Economy and Finance, as well as a wide range of private sector representatives.”

Published in Dawn, February 10th, 2015

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