IMF: Iran's foreign exchange reserves have fallen significantly

The International Monetary Fund, in its report on the situation of Middle Eastern countries, says that Iran's accessible foreign exchange reserves were about $121.6 billion in 2018, but fell to $12.7 billion last year and will decrease to $8.8 billion this year.

In the latest report of this international monetary institution, which was published on its website on Monday, October 10, the statistics on foreign exchange reserves include only resources that are available to the government. Thus, Iran's blocked resources abroad are not counted in the IMF statistics.

In a previous IMF report published in early spring, Iran's frozen foreign exchange reserves abroad were also calculated, and Iran's total foreign exchange reserves were estimated at $85 billion, which was almost $19 billion less than in 2019, and this figure was expected to drop to $69 billion next year. The bulk of these reserves are located abroad.

The new report does not say how much Iran's total domestic and foreign foreign exchange reserves, including blocked resources, are, but the drop in available foreign exchange reserves for the Islamic Republic to $8.8 billion indicates that the country is facing a currency crisis.

The dollar rate has doubled this year to over 32,000 Tomans. The most important reason for the dollar's rise is the government's inability to supply enough dollars to the market to maintain the value of the rial by creating a balance in the supply and demand of the currency.

Exports and GDP

The International Monetary Fund has forecast that Iran's combined oil, non-oil, and service exports will reach $52.7 billion this year, up from more than $103 billion in 2018.

The bulk of Iran's export decline is related to the country's fall in crude oil exports.

This international body says that both Iran's oil and non-oil GDP will decline sharply this year.

According to the report, the country's oil GDP is expected to decline by about 8.5 percent this year and the country's non-oil GDP by 4.5 percent compared to last year. Overall, Iran's entire economy will shrink by 5 percent compared to last year.

This is the third consecutive year that Iran has faced negative economic growth. Over the past three years, the Iranian economy has shrunk by nearly 17 percent overall, according to the International Monetary Fund.

Of course, the assessment of this international organization is based on the precondition that Iran can export half a million barrels of crude oil per day this year, while statistics from tanker tracking companies show that Iran has so far been able to export about 300,000 to 400,000 barrels of oil per day, and it is not exactly clear whether the Islamic Republic has been able to receive the money for its oil exports or not.

For example, according to Chinese customs statistics, the country bought 77,000 barrels of oil per day from Iran in the first seven months of this year. However, according to statistics from tanker tracking companies such as Kepler and Tanker Trackers, Iran has also sold almost the same amount of oil to China secretly, under the guise of Indonesian and Malaysian oil.

On the other hand, Iran is settling its $5 billion debt to China's CNPC and Sinopec for the development of the Yadavardan and Azadegan fields through oil deliveries, and it is not known how much of the oil Iran exported to China was used to clear Iran's debt to Chinese oil companies.

Syria and Venezuela are also customers of Iranian oil, and at least in the case of Syria, it is not exactly clear whether it pays for the delivery of Iranian oil or not.

In any case, the International Monetary Fund has predicted that Iran’s oil exports will fall to 400,000 barrels per day next year. Before the US sanctions, Iran was exporting 2.5 million barrels per day.

Debt and budget deficit

This international organization says that in order to avoid a budget deficit, the Iranian government needs the price of oil to be $521 per barrel, while the current price of oil is around $40.

Otherwise, according to the International Monetary Fund's forecast, Iran's total budget deficit this year is expected to be equivalent to 9.6 percent of total GDP, or about $58 billion.

Iran's government's net debt is also expected to peak this year at 44 percent of GDP, or about $258 billion.

In 2018, Iran's government's net debt was below 27% of GDP, indicating that the government's net debt has skyrocketed in the two years since sanctions were imposed.

The IMF's optimistic outlook

A look at the International Monetary Fund's statistics shows that although this international institution has reported the collapse of Iran's economic components, it has still viewed the Iranian economy with great complacency and optimism.

Apart from the forecast of half a million barrels of Iranian oil exports per day this year, Iran's total exports are also estimated very optimistically.

For example, according to Iranian customs statistics, the country's total non-oil exports in the first half of this solar year were only $13.5 billion, a 35 percent drop compared to the same period last year. Of course, Iran has also included gasoline exports in the list of "non-oil exports" for the first time, and interestingly, according to Mehdi Mirasharafi, the head of Iran's customs, "gasoline has been at the top of the country's non-oil exports."

Recently, Iraj Harirchi, head of the Iran-China Chamber of Commerce, told ILNA news agency that the country's total oil and non-oil exports are expected to be $35 billion this solar year.

Thus, the IMF's forecast of Iran's exports of $52.7 billion in oil, petroleum products, non-oil products, and services seems very optimistic.

Source: DW