The International Monetary Fund (IMF) in its latest report on the economy of the Middle East and North Africa region states that Iran needs $352 dollars of oil this year to prevent a budget deficit. According to this report, it is expected that Iran will also need to balance its government budget in the current year, which requires the global oil price to be $375 dollars. This is while the current price of Brent crude oil in global markets is $72 dollars.

On the other hand, Iran, in order to maintain its oil markets in China, delivers each barrel of oil to Chinese refineries with a $12 discount. This amount is in addition to the expenses that the Islamic Republic incurs to bypass oil sanctions. To further examine this report and the outlook for Iran’s economy this year, we spoke with economist and member of the faculty of Imam Sadeq University, Kamran Nedari.

How accurate and reliable is the recent report of the International Monetary Fund on the economic outlook of Iran?

Firstly, this report is based on official and government information, as the International Monetary Fund does not have a representative or office in Iran to gather this information. Therefore, the report from this international financial institution reflects an optimistic view. Additionally, based on our methodology, we know that the models, known as static models, are effective for countries with political and economic stability and are protected from internal and external tensions to some extent, in predicting the future. However, these models are not effective for Iran because the government does not have structural or daily policy stability, and internal and international tensions can create new scenarios.

Therefore, considering the budget deficit announced by the International Monetary Fund based on government and official information, this budget deficit has always been higher than predicted. Therefore, predicting an accurate budget deficit that can reflect future events will be difficult due to internal tensions and conflicts, both political and economic, as well as ineffective policies and international tensions. The inflation rate is also higher than what is mentioned in the IMF report, and in the past, IMF reports have always been reviewed and revised in their predictions. In the case of Iran, the IMF’s estimates of economic indicators usually increase based on new information provided to the Fund.

What are the most important factors affecting the budget deficit of the Iranian government?

In the past years, Iran has always included uncollectible figures for oil revenues in its budget and has been facing a one-third deficit from 1398 to 1400, for which the government has resorted to extensive borrowing to compensate. Usually, factors such as structural constraints in Iran’s economy, which have led to a rent-seeking and government-dependent economy, along with institutionalized and widespread corruption that plays a key role in wasting resources, along with inefficiencies and managerial inequalities, as well as international sanctions and the freezing of Iran’s banking system, all contribute to the deficit in Iran’s government budget.

نهاد

Proposal“سلام، من از ایران هستم”

“Hello, I am from Iran.”

The recent nose of the International Monetary Fund towards Iran’s economy is somewhat positive and hopeful. Is there a convincing reason to be hopeful about the predicted results?

The International Monetary Fund has predicted that in 2023, with a positive outlook on Iran’s economy, 10 major economic indicators will experience growth and improvement compared to the previous year. However, if we use the fallacy of hindsight to examine the IMF’s predictions, we will find that there is no positive sign of economic improvement in Iran that can be traced, and on the contrary, there is more evidence and indications of the severity of economic conditions; it is also worth noting that the government does not release recent statistics, especially regarding inflation in the month of Farvardin and specifically in the housing market for the past three months.

According to the International Monetary Fund, if Iran quadruples its oil price this year, the government budget will not be balanced. What is your assessment of this report?

In the budget for the year 1402, it has been predicted that Iran will be able to sell 1.4 million barrels of oil per day at a price of $85, resulting in a foreign exchange income of $43.5 billion by the end of the year. However, due to the current oil prices and Iran’s inability to sell its oil in the official international market, it will be forced to sell its oil at a discount and with high commissions to intermediaries in the black market of countries such as China and Venezuela. On the other hand, the continuation of the Islamic Republic’s nuclear and missile program and its policy of supporting proxy groups in the region is in contradiction with the national interests and overall policies of the country. No government in the world will continue its foreign policy as long as it cannot improve the general conditions of its people. It seems that the Islamic Republic government intends to continue its policy of supporting proxy groups by selling part of its oil in the black market,

Assuming the removal of sanctions.“سلام، من حسین هستم”

“Hello, I am Hossein.”

In the near future, can Iran quickly regain its previous position in the world energy market?

In the unlikely event that today’s international sanctions against Iran are lifted – which seems highly unlikely – Iran will still face serious challenges in selling its oil. The continuation of its foreign policy and support for proxy groups in the Middle East will not only decrease Iran’s share in global energy markets every day, but also lead to a natural gas crisis next winter. Additionally, if Iran is unable to attract the necessary capital to increase its oil and natural gas capacity in its oil fields – considering that most of Iran’s oil and gas fields are in the second half of their lifespan – it can be expected, as admitted by Iranian Oil Minister Javad Owji, that in the coming years, Iran will become an importer of oil and gas. Last month, Iran imported gasoline and diesel through rail from Russia to compensate for its shortage. This is while Iran has not yet taken any measures to address its natural gas shortage next winter, and this year is expected to be a difficult year for the country’s energy sector.

Thank you for the opportunity you have given us.