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Khatami calls economic plan "great step forward"

TEHRAN, Aug 24 (AFP) - Iranian President Mohammad Khatami defended his new five-year economic plan on Tuesday as a leap forward for the Islamic republic's hobbling oil-dependent econcomy.

"We need a profound change to reform and strengthen our economic infrasturcture," Khatami said as Iran kicked off its annual "Government Week" to evaluate the state of the nation.

The reformist president said the plan, due to be submitted to parliament soon, was a "great step forward based on our present means and possibilties," state radio reported.

Iran's supreme leader Ayatollah Ali Khamenei stressed that the economy "must be the government's principal concern" as Khatami and other officials gathered at the tomb of the Islamic republic's founder, Ayatollah Ruhollah Khomeiny, to begin the week's proceedings.

Khatami last week announced the broad outlines of the plan, which has already received Khamenei's seal of approval.

The five-year plan, which covers the years 2000-2005, calls for 112 billion dollars in state revenues, 58 billion of that from oil exports as well as 34.5 billion dollars in non-oil export revenues and a further 7.5 billion from "different sectors."

Khatami said that Iran was also seeking 12 billion dollars from abroad in loans and credits.

The plan is aimed at slashing Iran's current 15 percent unemployment rate to 10 percent, he said, and is based on an annual growth rate of six percent and a yearly inflation rate of 15 percent.

But inflation in the Islamic republic is currently racing at just under 20 percent according to official figures, while unofficial estimates put it at more than 40 percent in some sectors of the economy.

Meanwhile unemployment remains especially high among Iran's young, who make up more than 35 million of Iran's 60 million population.

Mohammad-Ali Najafi, head of Iran's Plan and Budget Organisation, recently said Iran would have to create some 900,000 new jobs each year to cope with the crisis.

But the largest change in Khatami's proposal comes in the estimate for crude prices, which this time have been set at 12.5 dollars per barrel as against roughly five dollars more in the last five-year plan.

Iran counts on oil for some 85 percent of its hard currency revenues and roughly half the state budget.

Fluctuations in crude prices, which have rebounded only recently after tumbling to record lows, left Iran with around a six billion dollar budget shortfall in the last Iranian year that ended in mid-March.

The economy has also been rocked by the worst drought in decades, wiping out much of the harvest and heightening Iran's chronic unemployment.

That has left the Islamic republic struggling to pay about 13 billion dollars in foreign debt while maintaining very high and expensive subsidies for basic needs such as bread, milk, meat and oil.


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