Oil windfall shifts Iran's economy into growth mode
By Peg Mackey
LONDON, Sep 30 (Reuters) - Robust oil prices are swelling Iran's coffers
by unexpected billions -- putting the key oil producer well on the road
to economic recovery, Iran's Central Bank Governor said on Friday.
``Higher oil prices will really help us speed up investment, reduce
unemployment and accelerate our economic growth,'' Governor Mohsen Nourbakhsh
told Reuters in an interview. The Central Bank chief expects strong oil
prices to generate about $7-$8 billion of extra income for Iran this year.
That's on top of budgeted oil export earnings of $11.5 billion.
``That money is not going to be idle,'' Nourbakhsh said. ``(Some of)
it will be used for the purpose of investment and export activities.''
As international oil prices hover at 10-year highs of near $30 a barrel,
Iran's crude oil exports of some 2.4 million barrels per day have been
fetching around $26 a barrel -- well over the forecast $14.5 per barrel.
The extra billions initially will pour into Iran's special oil stabilisation
fund -- set up under its five-year economic plan to protect the economy
against unpredictable drops in the price of oil, Iran's main hard currency
``This is the ultimate goal,'' said Nourbakhsh. But some of the reserves
will soon be freed up to help speed investment and reduce unemployment,
Iran's parliament has been asked to approve a partial release of the
unexpected oil profits to provide private sector loans for investors wanting
to export and earn foreign exchange and for portfolio management on a different
asset to create earnings for the account, he said.
Billions of dollars were likely to be released from the stabilisation
fund, Nourbakhsh said.
``Yes, I think it would be in that amount, but I can't give an exact
figure because we have to stabilise the budget as a first priority and
then proceed from there.''
The Central Bank Chief said the cash injection would happen soon.
``We didn't expect that money to be generated this year -- our expectation
was for next year, he said. ``So we asked the Parliament to give us permission
so this fund and its operation can start immediately.''
He was expecting no protests from the reformist Parliament, which is
to take up discussions within a month.
``The main idea is already in our third five year plan -- but the only
thing is the timing -- it was supposed to start next year, so they are
just changing that to the current year.''
Releasing some of the stabilisation fund could only spell good news
for Iran's economy, Nourbakhsh said.
``I think it helps a lot in terms of our growth rate,'' he said. ``We
expect to have more assurance of achieving our six percent GDP growth target,
a better chance of tackling our unemployment problem and at the same time
to have a stable macro-economic framework.''
To manage the fund, a special committee has been set up with high level
representation from the Central Bank Governor, Minister of Finance and
the Vice President in charge of planning and organisation.
STOCK MARKET OPENING
Iran is meanwhile about to welcome foreign investors back to its stock
market for the first time since the 1979 Islamic revolution.
``We are working on the criteria for investment and I hope within a
month and a half we will announce them,'' Nourbakhsh said. ``I have already
asked the people in charge to prepare the documents and they are working
Foreign investors could put their money into the Tehran Stock Market
immediately following the release of the investment guidelines, he said.
They will include a minimum time requirement for investment.
Nourbakhsh said he was aware that some foreign investors already were
``informally'' active on the stock market through Iranian companies. They
will soon have the opportunity to come out of hiding.
``To make this transparent and clear, we thought it would be better
to prepare a special framework for how foreign capital can come to the
Iran's drive to modernise its banking system by issuing licenses to
private banks for the first time in more than 20 years was also gathering
``There is strong demand for permits to establish private banks,'' said
Nourbakhsh. ``We are going to have private banks shoulder to shoulder with
public banks. In this way more competition is going to be created.''
Foreign banks are still not allowed to operate inland, but they can
operate in Iran's free trade zones. Nourbakhsh said the authorities in
the zones were supposed to negotiate with interested parties.