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Islamic Republic of Iran: Staff Report for the 2016 Article IV Consultation—Informational Annex

Author(s):
International Monetary Fund. Middle East and Central Asia Dept.
Published Date:
February 2017
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Fund Relations

A. Financial Position in the Fund as of December 31, 2016

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
Holdings1,536.82107.77

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)

20172018Forthcoming 201920202021
Principal Charges/Interest0.050.050.050.050.05
Total0.050.050.050.050.05

Implementation of HIPC Initiative: Not Applicable

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

Implementation of Catastrophe Containment and Relief (CCR)

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 two 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 December 7, 2015, and was published on December 21, 2015: (http://www.imf.org/external/pubs/ft/scr/2015/cr15349.pdf).

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 2017Tax Administration
FY 2017Tax Policy
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)
STAFY 2011GDDS: Metadata Development
FY 2016National Accounts

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 FY2002-2005, 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 and is a donor to IDA16.

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 two selected issues. The Bank has also recently initiated an analytical work program on Iran that comprises several topics ranging from productivity to air pollution.

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



GDP data are broadly sound. Accessibility of the quarterly estimates could be improved and made available with a consistent time lag. There is also scope for the Central Bank of Iran (CBI) and the Statistical Center of Iran (SCI) to advance their cooperation with a view to harmonizing their respective national accounts compilation programs. The CBI’s GDP rebasing exercise is on track, with the results expected to be available by the end of 2016/17 Iranian year. Communicating the rebasing plans ahead to users is international best practice and would enhance the credibility of the exercise.



Data on labor force and unemployment are published on the SCI website.
Price Statistics



A monthly consumer price index (CPI) and producer price index (PTI) are produced and disseminated by the CBI. The indices used 2011 as the base year, are of good quality, and are released in a timely manner.
Government Finance Statistics (GFS)



GFS cover only the central government; and are released without details on all the components of expenditure, and on an irregular basis. The authorities do not have the capacity to compile general government fiscal data due to shortcomings in the chart of accounts, 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 are transitioning over the coming years to a treasury single account and planning a gradual move to accrual based accounting—are ongoing, and are expected to enhance data quality and availability. The reporting of GFS data for publication in the Fund’s International Financial Statistics (IFS) was discontinued in 2010. The resumption of GFS data reporting for IFS publication is encouraged.



While central government data are compiled in accordance with the Government Finance Statistics Manual 2001 (GFSM), there is scope for improving the coverage of fiscal reporting on general government by including the nonfinancial public corporations sector, as well as other public agencies such as the National Development Fund of Iran, the Oil Stabilization Fund, and Targeted Subsidy Organization. Improving the scope and coverage of GFS would safeguard against arrears and allow better monitoring of liabilities, guarantees and fiscal risks.



The authorities plan to move from cash to accrual accounting in the context of broader reform of their public financial management system, for which they have received Fund TA.
Monetary and Financial Statistics



Monthly monetary data on central bank and deposit money banks are reported to STA for publication in the IFS, but not using the standardized report forms (SRFs). Reporting timeliness needs to be improved. Compilation of monetary statistics for central bank and deposit money banks diverges from international standards in the application of the residency criterion and in the sectorization and classification of accounts. The authorities are undertaking improvements in these areas, in line with the recommendations of past STA missions. The measure of broad money employed by the CBI does not include deposits of public nonfinancial corporations, local governments, or foreign-currency deposits of residents. The authorities do not compile and report monetary data for other financial corporations.
Financial Sector



The CBI publishes quarterly information on the ratio of nonperforming loans (NPL) to total loans in domestic and foreign currency in its Economic Trends. The NPL data are sourced from banks’ data reported to the CBI. The authorities also share with Fund Staff several other financial soundness indicators (FSIs). Iran does not participate in the IMF’s Coordinated Portfolio Investment Survey (CPIS) which collects data on cross border exposures. The availability of SRF-based MFS would also support more robust financial sector analysis using the balance sheet approach.
External Sector Statistics



The CBI has advanced work in adapting its external sector statistics compilation program in the line with the Fund’s Balance of Payments Manual, fifth edition (BPM5), but has no short-term plans for moving to the most recent methodological standard (BPM6) issued on 2009.



The CBI does not submit 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 large size of the errors and omissions in recent periods is an area of concern, and likely reflect gaps in the recording of financial account entries. A key issue is the coverage of financial flows associated with export proceeds of the petrochemical sector. These proceeds are likely held in deposits abroad for which no information is available; and this results in unrecorded counter entries to the exports recorded in the current account (goods). Steps should be taken to collect this information directly from the companies. Inward direct investment (DI) statistics are compiled by the Organization for Investment, Economic and Technical Assistance of Iran (OIETAI) whose work is focused on investment approvals for the nonoil sector. The recording of actual investment inflows could be improved; and the use of DI surveys should be explored to address possible gaps, including reinvested earnings.



Data on the international investment position (IIP) are compiled, but not disseminated. The authorities lack of capacity to compile complete and accurate IIP data owing to difficulties in tracking foreign assets under sanctions and the lack of information on corporate net foreign asset holdings. In recent years, the compilation of data has been very difficult under sanctions owing to difficulties in tracking foreign assets. Only data on public and publicly-guaranteed external debt are disseminated, but classifications do not fully accord with the guidelines of the External Debt Guide. Iran does not participate in the World Bank’s Quarterly External Debt Statistics (QEDS) database. Reserve asset positions are available to Fund staff but are not publicly disseminated. The data template on international reserves and foreign currency liquidity is not compiled.
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(January 2016)
Date of latest ObservationDate ReceivedFrequency of Data6Frequency of Reporting6Frequency of Publication6
Exchange RatesJanuary, 2017January, 2017DDD
International Reserve Assets and Reserve Liabilities of the Monetary Authorities1March 2016December 2016MII
Reserve/Base MoneyMarch 2016December 2016MII
Broad MoneyOctober 2016December 2016MMM
Central Bank Balance SheetOctober 2016December 2016MMM
Consolidated Balance Sheet of the Banking SystemOctober 2016December 2016MMM
Interest Rates2September 2016September 2016MQQ
Consumer Price IndexDecember 2016January 2017MMM
Revenue, Expenditure, Balance and Composition of Financing3–General Government4N/AN/AN/AN/AN/A
Revenue, Expenditure, Balance and Composition of Financing3–Central GovernmentNovember 2016January 2016MII
Stocks of Central Government and Central Government-Guaranteed Debt5June 2016January 2017QII
External Current Account BalanceJune 2016January 2017QQQ
Exports and Imports of Goods and ServicesOctober 2016December 2016MMM
GDP/GNPSeptember 2016December 2016QQQ
Gross External DebtOctober 2016December 2016MQQ
International Investment Position7N/AN/AN/AN/AN/A

Includes reserve assets pledged or otherwise encumbered as well as net derivative positions.

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.

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.

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

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