Iran implementing bold economic makeover: IMF

The IMF has said Iran's economic reform plan is one of the boldest economic makeovers ever attempted in the Middle East, according to the Wall Street Journal.

In an article on the Islamic Republic's subsidy reform plan entitled "Iran Redistributes Wealth in Bid to Fight Sanctions", published in the July 27 edition of the newspaper, the Wall Street Journal stated that "Iran's Islamist government may be public enemy No. 1 at the White House. But in the halls of the International Monetary Fund a few blocks away, President Mahmoud Ahmadinejad is being hailed as an economic reformer."

Earlier, the International Monetary Fund praised Iran's economic reform plan and the weekly magazine The Economist said other governments in the region should envy Iran's bold economic reforms.

On June 17, a press release issued by a mission from the IMF "cheered" the Islamic Republic's economy and the economic policies of the Iranian government.

And on June 25, The Economist published an article saying Iran's economic reform plan "relieved the government of a huge financial burden; it has slashed local energy demand, reducing chronic pollution and leaving more oil for export."

The Wall Street Journal article wrote: "Tehran has cut price subsidies on most energy and food products since December in a bid to shave about $60 billion or more off the government's expenses annually. The move has led to a sharp drop in domestic oil and gas consumption, according to senior Iranian and IMF officials, freeing up a larger portion of Iran's vast energy assets for export."

"Mr. Ahmadinejad's reforms amount to a massive redistribution of his country's wealth, since his government and the IMF say the energy subsidies largely benefited Iran's wealthy ruling classes. The president is using his government's savings to transfer to most Iranian households the equivalent of $40 per month to offset higher local prices and international sanctions, while trying to stimulate the domestic economy," the article added.

"This reform is first and foremost about reducing a waste of resources," Dominique Guillaume, the IMF's lead economist on Iran, said in an interview. "But it also creates a greater sharing of Iran's oil wealth amongst its people."

The Wall Street Journal article went on to say that for years, the IMF and World Bank have pressed Middle Eastern countries to embrace market prices, "but so far to no avail outside Iran. Since political uprisings erupted across the region this year, Jordan, Algeria and Saudi Arabia, among others, have committed billions of dollars more to keeping prices artificially low and employment stable."

Ahmadinejad's reforms amount to a bold attempt to turn adversity to Iran's economic advantage, the article stated.

And the plunge in domestic energy demand brought about by the price increases has helped Ahmadinejad soften the impact of international sanctions that specifically targeted Iran's gasoline imports, the newspaper noted.

"The budget for Iran's fiscal year ending March 2012 predicted the government would save $53 billion from the subsidy cuts. It would, in turn, allocate 80% to cash payments to the public and 20% to industries," the article added.

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