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Islamic Republic of Iran: Staff Report for the 2018 Article IV Consultation—Informational Annex

Author(s):
International Monetary Fund. Middle East and Central Asia Dept.
Published Date:
March 2018
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Fund Relations

A. Financial Position in the Fund as of February 28, 2018

Membership Status:

Date of membership: December 29, 1945

Status: Article VIII

General Resources Account

SDR MillionPercent Quota
Quota3,567.10100.00
Fund Holdings of Currency3,049.6585.49
Reserve Tranche Position517.4914.51

SDR Department

SDR MillionPercent Allocation
Net cumulative allocation1,426.06100.00
Holdings1,536.82107.94

Outstanding Purchases and Loans: None

Latest Financial Arrangements

TypeDate of ArrangementExpiration DateAmount Approved (SDR Million)Amount Drawn (SDR Million)
Stand-byOct 10, 1960Mar 20, 196235.0022.50
Stand-byMay 18, 1956Nov 17, 195617.5017.50

Projected Payments to the Fund1

(SDR million; based on existing use of resources and present holdings of SDRs)

Forthcoming
20172018201920202021
Principal
Charges/Interest0.040.040.040.040.04
Total0.040.040.040.040.04

When a member has overdue financial obligations outstanding for more than three months, the amount of such arrears will be shown in this section.

When a member has overdue financial obligations outstanding for more than three months, the amount of such arrears will be shown in this section.

Implementation of HIPC Initiative: Not Applicable

Implementation of Multilateral Debt Relief Initiative (MDRI): Not Applicable

Implementation of Catastrophe Containment and Relief (CCR): Not Applicable

As of February 4, 2015, the Post-Catastrophe Debt Relief Trust has been transformed to the Catastrophe Containment and Relief (CCR) Trust.

B. Exchange System

The official exchange rate’s de jure classification is a managed float. De facto, however, it has followed a crawl-like arrangement since March 2014, depreciating about one percent per month against the U.S. dollar. The bureau market has displayed greater flexibility as it is largely market-determined. With effect from September 6, 2004, the Islamic Republic of Iran accepted the obligations under Article VIII, Sections 2, 3, and 4 of the Fund’s Articles of Agreement. Iran maintains multiple currency practices and an exchange restriction subject to Fund jurisdiction under Article VIII, Sections 2(a) and 3:

  • A multiple currency practice and an exchange restriction, arises from the establishment of an official exchange rate for use in some exchange transactions, which in practice differs by more than 2 percent from the rate used by foreign exchange bureaus.

  • A multiple currency practice arises from the differences of more than 2 percent between the current official and exchange bureaus rates and the preferential rates for certain imports for which foreign exchange commitments were made through letters of credit opened prior to March 21, 2002 under the previous multiple exchange rate system.

  • A multiple currency practice arises from the differences of more than two percent between the current official and exchange bureaus rates and the preferential rates for certain imports for which foreign exchange payment commitments were made through letters of credits or bank drafts prior to July 24, 2012.

C. Last Article IV Consultation

Iran is on the standard 12-month consultation cycle. The last Article IV consultation was concluded by the Executive Board on February 24, 2017, and was published on February 27, 2017: (http://www.imf.org/en/Publications/CR/Issues/2017/02/27/Islamic-Republic-of-Iran-2016-Article-IV-Consultation-Press-Release-Staff-Report-and-44707).

D. Technical Assistance

Since FY 2009, Iran received the following technical assistance:

DepartmentDatePurpose
FADFY 2009Tax administration and VAT
FY 2010Tax policy
FY 2010Tax Administration—Risk Management and Audit
FY 2011Tax Administration
FY 2013Tax Administration
FY 2014Tax Administration
FY 2016Public Financial Management
FY 2016Tax Administration
FY 2017Tax Policy
FY 2017Pension System Assessment
FY 2017Reform of Financial Supervision
FY 2017Implementation of Accrual Accounting
LEGFY 2009Anti-Money Laundering/Combating Financing of Terrorism (AML/CFT)
FY 2017AML/CFT Pre-Assessment Course
MCMFY 2010Macrofinancial Policies and Financial Stability (with MCD and LEG)
FY 2015Banking Supervision
FY 2015Exchange Rate Unification
FY 2016Monetary Policy Instruments
FY 2017Capacity building/TA workshop on Banking Resolution (MCD and LEG)
FY 2017Bank restructuring and Resolution
STAFY 2011GDDS: Metadata Development
FY 2015National Accounts
FY 2017Multisector Sector Statistics Mission

Relations with the World Bank Group

The World Bank Group does not have a country program strategy in the Islamic Republic of Iran. The last Interim Assistance Strategy covered FY 2002–05, and the last IBRD project closed in 2012. The IFC has no exposure to the Islamic Republic of Iran. MIGA issued two guarantees in 2005, and no guarantees have been provided since then. Iran is currently a member of the Bank in good standing.

The Bank prepares a bi-annual economic monitoring note (Iran Economic Review) that analyzes recent economic developments in Iran and provides a medium-term economic outlook as well as special focus sections on selected issues. The Bank has also recently initiated an analytical work program on Iran that comprises a number of topics including air pollution, pensions and assisting Iran with a National Risk Assessment for AML/CFT.

Statistical Issues

Assessment of Data Adequacy for Surveillance
General
Data provision is broadly adequate for surveillance with some data shortcomings noted below. Data are reported with delays and also provided infrequently.
The Central Bank of Iran (CBI) disseminates key statistical aggregates in its quarterly Economic Trends, also available at http://www.cbi.ir/default_en.aspx.
National Accounts
National accounts estimates published by the CBI and the Statistical Center of Iran (SCI) are significantly different. Improved coordination and cooperation between these two agencies may reduce duplication of tasks and improve the quality of real sector statistics. The current-price GDP estimates for main economic activities do not cover significant parts of the non-observed economy, and the estimates of imputed rent of owner occupied dwellings appear overestimated. Accessibility of the quarterly estimates could be improved and made available with a consistent time lag. The accuracy of estimates of constant-price GDP can be improved by implementing double deflation for selected activities, and by improving the compilation of taxes on products.
Price Statistics
A monthly consumer price index (CPI) and producer price index (PTI) for main urban areas are produced and disseminated by the CBI. The indices use 2011 as the base year, are of good quality, and are released in a timely manner.
Government Finance Statistics
Fiscal data provided for surveillance cover only the central government, and are released on a cash basis without full details on all the components of expenditure, and on an irregular basis. However, the Treasury General’s Office collects budget execution data reported by the spending units for internal control purposes. These data include expenditure breakdowns according to the budget classification and is available for all budgetary central government units. This source evidences the availability of data to enable the compilation of complete GFS data for budgetary central government. The authorities do not have the capacity to compile general government fiscal data at present due to shortcomings in the chart of accounts and their inability to track and record general government transactions. Efforts are being made to strengthen the Treasury functions—a new debt management office was created and the authorities plan to transition over the coming years to a treasury single account and are planning a gradual move to accrual based accounting for which they have received Fund TA—which is expected to enhance data quality and availability. The reporting of GFS data for publication in the Fund’s Government Finance Statistics Yearbook (GFSY) was discontinued in 2010. The resumption of GFS data reporting for GFSY is encouraged.
Developing general government and public sector debt statistics is key to improving the scope and usefulness of fiscal statistics. In particular, expanding the coverage of fiscal data to general government (or beyond to cover nonfinancial public enterprises) to include public agencies such as the National Development Fund of Iran, the Targeted Subsidy Organization and public pension funds would provide a more complete view of fiscal activities to policy makers. Improving the scope and coverage of GFS would safeguard against arrears and allow better monitoring of liabilities, guarantees and fiscal risks.
Monetary and Financial Statistics
The Central Bank of Iran (CBI) is yet to compile and submit monetary data to STA using standardized report forms (SRFs). Monthly monetary data on central bank and other depository corporations are reported to STA using old reporting forms with long lags, the latest being for February 2017. The data is highly aggregated hindering proper classification and sectoring of financial instruments necessary for improving data quality. The authorities are planning to undertake improvements in these areas, in line with the recommendations of the December 2017 STA multisector statistics mission. Data for other financial corporations are yet to be compiled and reported to STA.
Financial Sector
Financial soundness indicators (FSIs) are compiled semi-annually by the CBI for internal supervision, and are shared with Fund staff but are not disseminated to the public. They comprise 23 indicators, which partially cover the Fund’s recommended list of core and encouraged FSIs, while others go beyond this list. To improve the usefulness of the FSIs for supervisory purposes and assessment of the financial sector, these FSIs should be compiled at least quarterly, and should be disseminated to the public. The December 2017 multisector statistics mission made recommendations to improve the quality of the compiled FSIs and urged submission of these data to STA for publication in the IMF website.
External Sector Statistics
The CBI does not submit quarterly or annual balance of payments data to the Fund for re-dissemination in the IFS. However, based on the data provided to Fund staff for surveillance, the sizeable errors and omissions undermines the reliability of the balance of payments data. This is primarily the result of undercoverage of transactions in financial instruments under other investment—including foreign deposits (assets) of resident nonfinancial corporations, and loans and deposit liabilities of resident sectors. Further, direct investment source data deviate from international standards in key areas of concepts and definitions, coverage and scope, and basis of recording.
To enhance the coverage of the current account, the December 2017 multisector statistics mission recommended a revival of the bank reporting system to aid improvements in the estimates of services, investment income, and personal transfers. It also cited gaps in the unpublished gross external debt statistics by sector/financial instruments.
International investment position (IIP) statistics are compiled but not disseminated. Only data on public and publicly-guaranteed external debt are disseminated, but classifications do not fully accord with the guidelines of the 2003/2013 External Debt Statistics: Guide for Compilers and Users. Iran does not participate in the World Bank’s Quarterly External Debt Statistics (QEDS) database. Reserve asset positions are not publicly disseminated. The foreign assets in domestic currency terms as reported in the monetary survey, together with within year preliminary data on the change in official reserves shared with staff, may imply sizeable valuation changes once annual data on the change in gross international reserves become available. The data template on international reserves and foreign currency liquidity is not compiled.
With a view to enhancing the transparency of Iran’s external sector statistics, the authorities should publish the IIP, and disseminate more comprehensive financial account data (including separately identifying assets and liabilities by financial instrument).
Data Standards and Quality
Participant in the General Data Dissemination System (GDDS) since 2012. Iran still needs to improve the scope and timeliness of data dissemination to meet the Enhanced-GDDS, and is encouraged to develop and maintain a national summary data page.No data ROSC is available.
Islamic Republic of Iran: Common Indicator Required for Surveillance(February 2018)
Date of latest ObservationDate ReceivedFrequency of Data6Frequency of Reporting6Frequency of Publication6
Exchange RatesFebruary 2018February 2018DDD
International Reserve Assets and Reserve Liabilities of the Monetary Authorities1January 2018February 2018MII
Reserve/Base MoneyDecember 2017February 2018MII
Broad MoneyDecember 2017February 2018MMM
Central Bank Balance SheetJanuary 2018February 2018MMM
Consolidated Balance Sheet of the Banking SystemDecember 2017February 2018MMM
Interest Rates2December 2017December 2017MQQ
Consumer Price IndexJanuary 2018February 2018MMM
Revenue, Expenditure, Balance and Composition of Financing3–General Government4N/AN/AN/AN/AN/A
Revenue, Expenditure, Balance and Composition of Financing3–Central GovernmentNovember 2017February 2018MII
Stocks of Central Government and Central Government-Guaranteed Debt5June 2017January 2018QII
External Current Account BalanceSeptember 2017December 2017QQQ
Exports and Imports of Goods and ServicesDecember 2017February 2018MMM
GDP/GNPSeptember 2017January 2018QQQ
Gross External DebtDecember 2017February 2018MQQ
International Investment Position7N/AN/AN/AN/AN/A

Includes reserve assets pledged or otherwise encumbered as well as net derivative positions. Data received in local currency.

Both market-based and officially determined, including discount rates, money market rates, rates on treasury bills, and notes and bonds.

Foreign, domestic bank, and domestic nonbank financing.

The general government consists of the central government (budgetary funds, extra budgetary funds, and social security funds) and state and local governments.

Including currency and maturity composition.

Daily (D), weekly (W), monthly (M), quarterly (Q), annually (A), irregular (I), and not available (NA).

Includes the external financial assets and liabilities vis-à-vis nonresidents of the financial sector.

Includes reserve assets pledged or otherwise encumbered as well as net derivative positions. Data received in local currency.

Both market-based and officially determined, including discount rates, money market rates, rates on treasury bills, and notes and bonds.

Foreign, domestic bank, and domestic nonbank financing.

The general government consists of the central government (budgetary funds, extra budgetary funds, and social security funds) and state and local governments.

Including currency and maturity composition.

Daily (D), weekly (W), monthly (M), quarterly (Q), annually (A), irregular (I), and not available (NA).

Includes the external financial assets and liabilities vis-à-vis nonresidents of the financial sector.

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