Khatami unveils policies to heal Iran's economy

TEHRAN, Aug 2 (AFP) - President Mohammad Khatami pledged to aim for a fundamental revamp of Iran's economy on Sunday as he unveiled his policies to attract foreign investment and fight unemployment and inflation.

Khatami, quoted by state-run radio, warned that the Iranian economy was "chronically ill."

"This will continue to be so unless there's fundamental restructuring," said the president, who was speaking on the eve of his inauguration.

He pledged to try to attract foreign investment, introduce bureaucratic reform and fight unemployment and inflation.

"We will try to create jobs by boosting production and productivity as well as removing regulations which inhibit investment," Khatami said. "We will also fight inflation to increase our people's purchasing power."

The president also vowed to "create security" for investment, and to try to attract foreign capital, notably those owned by Iranian expatriates, up to a million of whom live in the United States, most from well-to-do families.

He said his government would ease red tape, introduce tax reform to try to raise productivity. He would also give a stronger role to the private sector and ease the state monopoly in the economy.

Iran has been facing an economic crisis because of a sharp drop in oil prices to around 10 dollars a barrel. This year, it is expected to face a revenue shortfall of six billion dollars, or around a third of the budget.

But Khatami promised to try to boost non-oil exports to ease reliance on crude exports, which make up nearly 85 percent of the country's revenues in hard currency.

He also promised to continue subsidizing basic goods, such as medicine, saying "social equity has precedence over production growth."

The inflation rate is officially put at 20 percent, but independent sources estimate it at around 40 percent. The official unemployment rate is 11 percent, but it is as high as 20 percent in poorer regions of Iran.

The country also faces a foreign debt of around 13 billion dollars, a large chunk of which the country has to pay with interest each year.

The president called for the public to be patient with his government while it tried to address economic problems.

"The revenues forecast have not been realized. The government has been bearing a lot of pressure so that the people will not have to bear them," Khatami said.

"But the future will be better. Our greatest asset is our people's patience," he said.

Related links

* Iran News
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