Road from oil-reliant economy to oil free one

TEHRAN, Jun. 12 (MNA) – The US-led sanctions, imposed to squeeze Iran’s oil-reliant economy by restricting oil revenues, has made the need for moving toward a non-oil economy for Iran ever-increasing.

In better words, the issue comes of the highest importance than before, due to Trump’s decision on cutting all waivers of Iranian oil which will dramatically decrease oil-reliant country’s oil revenues i.e. sanctions are designed to hit the economy in its Achilles heel, i.e. oil revenues..

The Islamic Parliament Research Center (IPRC), in its recent report, has discussed ways to reach a non-oil economy, the one which is not dependent on oil revenues.Among the discussed methods by the Research Center, it can be referred to levying taxes on capital gains, on costly real estate and imports management.

“No economist supports continuation of sanctions. Economic sanctions weaken the country’s production power and reduces people’s welfare in the long and short run,” the report says.

However, the report admits that reducing reliance on oil income cannot be translated into decreasing oil exports to zero but as it discusses, in case oil exports drop to zero, the conditions would be manageable via managing balance of payments and controlling the forex market.

Urging the government to take a sustainable anti-sanctions attitude, the report calls for taking required measure to amend the foreign exchange rates, market and in general the structure of forex sector.

In recent months, the government has been dealing with unpredictable foreign exchange rate fluctuations which have directly influenced the prices of basic goods, raw materials, and domestic unofficial markets. 

Accordingly, the government has been determined to review and modify its monetary policies about setting foreign exchange rates, curb the rampant inflation and high liquidity volume and supply the present budget deficit via relying on stock market.

It also has sought to move toward a non-oil-reliant economy to be able to prevent its operating costs, surpass its income, to tackle the rampant inflation, increase the income of its employees and pay the intended cash subsidies to lower income-earners without increasing the prices of energy carriers and fuel or levying higher taxes, which do not seem to be welcome by the Iranian nation under the ongoing conditions.

Based on the latest data released by the Islamic Republic of Iran Customs Administration (IRICA), in the first two months of the current Iranian calendar year (March 21- May 21), Iran exported $8.4 billion of non-oil products. The figure shows an increase of 7.1 percent from $7.7 billion in the same time span in the year preceding.

On May 14, Iranian first Vice-President Es’hagh Jahangiri announced that the country’s reliance on oil income has dropped below 30 percent. The government could manage to decrease Iran’s dependence on oil revenues from its previous 80-90 percent to less than 30 percent, the Iranian official said.

In recent days, the forex rates have experienced a cooling trend and the central bank claims to have more control over its foreign exchange market. CBI believes the decline is the result of the formation of the CBI's planned Regulated Foreign Exchange Market, which could make the market balanced via fair distribution of forex resources among domestic exporters who have re-injected their exports revenues back into the economy cycle.

Some, however, believe that the drop is due to political reasons: the visit of the Japanese foreign minister to Iran.

Whatever the reason is, the predictability of this market is still low. No one can foresee the market’s trend even in near future.

As discussed, regarding Trump’s new round of sanctions on Iranian metal and petrochemicals sector, the need for an indigenous economy and boosting production to have non-oil exports revenues augment is more highlighted.

Increasing non-oil exports to neighbor countries besides making structural economic modifications are hoped to revive the breathless economy.

HJ/

News Code 146278

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