The Iranian economy is beginning to recover more quickly from years of international sanctions, but the country urgently needs to strengthen its banks, said Monday a senior official of the International Monetary Fund.
Gross domestic product growth reached 12.5% during the year up to March 20, but almost entirely thanks to oil exports, after most sanctions were lifted as part of Tehran's nuclear program.
Oil exports are not progressing as fast. But the economic recovery is now starting to spread to non-oil areas, said Catriona Purfield, head of an IMF team who held annual consultations with the Iranian government this month.
"Growth has begun to spread to the non-oil sector," Purfield said in a statement, predicting that GDP would grow by 4.2% during the current fiscal year and that growth could reach 4.5% the following years with financial reforms.
Official statistics in Iran are often incomplete and only published slowly, and the policy-making process may be opaque, so Iran's consultations with the IMF provide one of the best glimpses of its economy.
The country's recovery was slowed by tensions with the United States, where President Donald Trump raised the possibility of reimposing sanctions or introducing new sanctions. This has deterred many banks and other foreign companies from operating in Iran.
Mr Purfield said that given this uncertainty and the growing vulnerability of the Iranian financial system, the government urgently needed to restructure and recapitalize banks and credit institutions.
"An asset quality review, an assessment of related party lending and an action plan with a timetable to recapitalize banks and address unproductive loan issues should begin immediately", she added. long-term government bond issues.
Iranian banks were weakened during the years of sanctions by a sluggish economy, government interference in lending decisions, lax regulation and excessive competition with unauthorized financial institutions.
Authorities are now discussing how to deal with tens of billions of dollars in bad debts, but efforts to solve the problem have been slowed down by their cost and complexity.
President Hassan Rohani's government has also tabled amendments in parliament that he believes would strengthen anti-money laundering and anti-terrorist financing legislation.
The IMF urged Tehran to adopt the amendments by the end of January 2018 deadline set by the Financial Action Task Force, a global body fighting illicit money flows. This would help Iran to reintegrate into the global financial system, according to the IMF.
The Iranian central bank intervened in the foreign exchange market to support the national currency in the face of international uncertainty.
But the IMF urged the central bank to let exchange rates move more freely and abolish a dual system of official and market rates, saying that it would prevent Iran 's foreign reserves from diminishing and rendering the country' s economy. more competitive economy.