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Abstract
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.
.3 Sources: World Bank; British Petroleum Statistical Bulletin; IMF staff estimates and projections. Table 18 . Consumption from Oil Wealth (In billions of current U.S. dollars, unless otherwise indicated) Preliminary Projected 2003/04 2004/05 Total 860.8 … Oil wealth 645.1 … Gas wealth 225.8 … Initial debt, net of OSF foreign exchange deposits 10.0 … Estimated consumption from oil wealth if: Oil wealth constant in real terms 34.4 35.1 Oil wealth constant in real
consumption from oil wealth to the stream of returns from accumulated financial assets. 10 Such a policy ensures that projected future consumption from oil wealth remains relatively stable, even if the oil revenues unexpectedly dry up. Government expenditures per capita are equal to: G t = ( R − 1 ) F t ( 18 ) 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 consumption from oil wealth (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 consumption from oil wealth, 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