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Iran's Net Debt, 44% of its GDP, IMF Says

Iran-- Iranian rial notes
Iran-- Iranian rial notes

In its latest report released on Monday, the International Monetary Fund estimates that the Iranian government's net debt will reach about $260 billion by 2020, which is equivalent to 44 percent of Iran's gross domestic product.

Before the reimposition of U.S. sanctions on Tehran in 2018, Iran's net debt amounted to less than $118 billion.

Therefore, the Iranian government's net debt from 2018 to the end of this year will be almost 2.2 times more.

Local news outlets and the Majlis Parliament Research Center had both reported a significant budget deficit for the current Iranian calendar year starting March 20, 2020.

In the previous year, President Hassan Rouhani's government faced a significant budget deficit since it had included selling 1.5 million oil barrels per day, but it failed to export even half of it.

In December 2019, the Majlis Research Center published a report saying that, even with borrowing, half of Iran's budget between March 20, 2020, and March 20, 2021 would still be in deficit and could not be achieved.

Currently, according to the International Monetary Fund, Iran's total budget deficit, including the government's, will be about $58 billion this year, equivalent to about one-tenth of the country's economy. The Iranian government's total net debt will reach $258 billion, $11.6 billion in foreign debt.

Contrary to Iranian officials' claims that the country's non-oil economic growth is positive, the IMF predicts that Iran's non-oil economic growth will be negative 4.5 percent this year. Iran's oil economic growth will also be negative 8.5 percent.

Rouhani claimed on October 3 that "the German economy, although not sanctioned, will shrink by 5.2 percent," but that the "Iranian economy will certainly be in better shape than Germany's."

Another critical point in the IMF's report is that the available foreign exchange reserves for Iran this year will be less than $9 billion, while in 2018, it was about $122 billion.

The governor of the Central Bank of Iran (CBI), Abdol-Nasser Hemmati, had previously said that a large part of Iran's foreign exchange reserves had been frozen abroad. However, he never mentioned a specific figure.

At a meeting of the "Government-Private Sector Dialogue Council" on Monday, Hemmati maintained, "The reason for the increase in the price of hard currencies was not the issuance of multiple foreign exchange directives, but the decrease in the country's foreign exchange earnings."

The IMF has not mentioned Iran's total foreign exchange reserves in its latest report, but its April report predicted that Iran's foreign exchange reserves would be $85 billion this year.

Thus, if Iran's foreign exchange reserves have not decreased during this period, 90% of Iran's foreign exchange reserves are blocked abroad, and only $ 8.8 billion is accessible.

Before the sanctions, oil accounted for 60 percent of the country's total exports, and a substantial portion of Iran's foreign exchange earnings came from it.

The decline in the country's foreign exchange earnings has led to a fall in the value of the Iranian national currency, the rial.

The dollar rate at the beginning of this year was 160,000 rials, but last week it peaked above 320,000 rials, and on Monday, its price was 314,500 rials.