Iran has received much attention from a geopolitical and regional standpoint, but its economic challenges have not attracted a similar degree of interest. With a population of 69 million, considerable hydrocarbon resources, a dynamic and entrepreneurial middle class, and a relatively well-educated labor force, Iran's economic potential is considerable. This volume takes stock of critical developments in the Iranian economy in recent years. The study reviews the key issues and policy responses, highlights the nature of the challenges ahead, and draws implications for the next phase of reforms. The authors conclude that major challenges remain, although significant advances have been made in recent years in opening up the economy to international trade and foreign direct investment, encouraging the private sector, removing exchange restrictions, reforming the tax system, and enhancing macroeconomic management.
Sources: World Bank; British Petroleum Statistical Bulletin; IMF staff estimates and projections.
Table 18 .
(In billions of current U.S. dollars, unless otherwise indicated)
Initial debt, net of OSF foreign exchange deposits
Estimated consumptionfromoilwealth if:
Oil wealth constant in real terms
Oil wealth constant in real
The paper presents numerical simulations of various fiscal rules for oil-producing countries. Welfare implications are sensitive to the choice of the social welfare function, initial conditions, and non-oil growth prospects. The distribution of non-oil wealth is important for countries with relatively low oil reserves. Corrections for adjustment costs and uncertainty with respect to oil prices should be applied carefully. While avoiding sharp changes in the fiscal policy stance may be appealing, it is not necessarily optimal if the initial position is unsustainable. Ad hoc rules are shown to perform poorly. The analysis abstracts from several issues critical for developing a practical policy advice and should not be treated as a complete framework.
Angola’s economy was badly buffeted by the sharp drop in global oil prices. Policy discussions for the review focused on the 2011 budget, the handling of the arrears problem, monetary and exchange rate policies, and key elements of the authorities’ administrative and policy reform agenda. Angolan banks have not been severely impaired by the financial instability of the past two years, and the sector maintains an adequate capital buffer. Four elements—public financial management, tax reform, improving the business environment, and transparency and safeguards issues—are discussed.
Member countries of the Central African Economic and Monetary Community are recovering from the global financial crisis, although growth in 2011 has not returned to precrisis levels. Executive Directors welcomed the region’s economic recovery from the global financial crisis and its overall positive outlook. Directors noted, however, that the recovery has been uneven across member countries and that inflation is on the rise owing to high international food and fuel prices. Directors encouraged the authorities to adopt an appropriate policy mix to contain inflationary pressures in the short term.
From the discussions, the paper reveals the vulnerability of the Azerbaijan banking system to conventional risk factors. Despite a stable macroeconomic environment and high margins of intermediation, the profitability of the banking system is on the decline. There has been an increase in the unemployment rate, maternal mortality rates, drop-out rates, and widespread use of unofficial user charges. The role of fiscal and monetary policies in response to an oil boom should be to facilitate a smooth transfer of resources from the non-oil traded sector.
This paper discusses the common policies adopted by the members of the Central African Economic and Monetary Community (CEMAC). The macroeconomic performance was good in 2011 with improved fiscal balances, public investment programs, and higher reserves. However, CEMAC is facing challenges from deep-seated structural problems, including uncoordinated fiscal policy, financial sector weaknesses, and obstacles to growth and competitiveness. The Executive Board recommends monetary policies for financial stability and suggest making monetary policies an efficient tool of macroeconomic management. Also, the Board recommends strengthening of governance of CEMAC’s common institutions.
consumptionfromoilwealth to the stream of returns from accumulated financial assets. 10
Such a policy ensures that projected future consumptionfromoilwealth remains relatively stable, even if the oil revenues unexpectedly dry up. Government expenditures per capita are equal to:
Under such a rule, per capita consumption from the oil wealth may increase with time as financial assets are gradually accumulated, implying transfers from current to future
and staff agreed on the merits of adopting some form of fiscal rule (or principle) that would ensure smoothing of expenditure over the oil price cycle, while providing for a gradual build-up of resources in some form of sovereign wealth or stabilization fund . The authorities were unconvinced of the case for anchoring fiscal policy around a rule that smoothed inter-temporal consumptionfromoilwealth (e.g. setting a target for the non-oil primary deficit), arguing that investing today in infrastructure and other growth-supporting projects would provide greater
, where the oil sector is marginal.
Model-based assessment of the REER
Using the Bems and Carvalho (2009) 1 model, which calls for smoothing intertemporal consumptionfromoilwealth, we derive a current account norm under two different allocation rules. The exchange rate assessment compares this norm to the underlying 2015 current account, which is heavily influenced by the temporarily high public investment. This amounts to a very stringent test because the norm presumes that investment should be smoothed across generations. Comparing this norm to the