IMF report on Iran's economic success draws scepticism

Economists have reacted with scepticism to an IMF statement that praises the economic policies of Iran's president, Mahmoud Ahmadinejad, in the face of drastic punitive measures against the country.

The IMF said it has revised its previous figures on Iran's economy after a brief visit to the country, expressing admiration for some of the controversial plans introduced by the hardline president.

A mission led by Dominique Guillaume, a deputy division chief at the IMF, which travelled to Iran for two weeks in May and June this year, concluded that the government had been successful "in reducing inequalities, improving living standards and supporting domestic demand".

The IMF previously predicted that Iran's economy would suffer zero growth in 2011, but now says real GDP growth recovered to an estimated 3.5% last year and forecast "positive growth momentum continued in 2010/11".

It also said inflation had been brought down from 25.4% to 12.4%. The statement attracted extensive coverage in Iran's state-run media, which said the IMF had "corrected" itself.

Independent experts, however, raised doubts over the IMF's latest conclusions and questioned its support for Ahmadinejad's policy of removing long-standing but costly subsidies on fuel, food and other daily essentials, implemented last December.

The IMF statement said: "The mission commended the authorities for the early success in the implementation of their ambitious subsidy reform programme."

Hassan Hakimian, an economic expert and director of the London Middle East Institute at SOAS, said: "The IMF has long advocated the abolition of food and energy subsidies in Iran. Yet, what is hard to digest is the basis for its suggestions about improvements in living standards and greater equality due to this programme in such a short span of time.

"I believe the IMF is on the optimistic side and comes across as rather rash in its judgment. Most independent observers believe that it's too soon to draw such conclusions … and it has not yet produced the required evidence to substantiate the claims made."

According to Hakimian, official data about Iran's economy such as inflation and unemployment rates are often disputed both internally and externally.

Borghan Nezami Narajabad, assistant professor of economics at Rice University in Texas, criticised the IMF's "backward looking" and "premature conclusions" and said the split between Iran's parliament and the government over the plan showed it had not worked successfully. "The subsidy plan has actually increased the government's fiscal burden. The IMF has completely contradicted its own previous views … and has ignored independent views such as those expressed by the World Energy Outlook.

Since Ahmadinejad took the office in 2005, independent economists have been silenced and some, such as Saeed Laylaz and Fariborz Raeis-Dana, have been detained.

Source: guardian.co.uk