In its latest quarterly report on the economic situation in the Middle East and Central Asia, published on October 12, the International Monetary Fund (IMF) has predicted that Ebrahim Raisi’s government’s debt this year will reach 30.6 percent of the country’s gross domestic product.
Iran’s gross domestic product this year, according to the assessment of this international institution, will be approximately $366.4 billion. Therefore, the government’s debt exceeds $112 billion, which is equivalent to more than three years’ worth of the government’s general budget.
According to the IMF’s forecast, Ebrahim Raisi’s government’s debt will increase by approximately another $6 billion next year.
During the past two governments, extensive borrowing from the central bank and other financial institutions of the country was carried out to compensate for budget deficits. This has led to a surge in liquidity and, consequently, rampant inflation.
Since Ebrahim Raisi’s inauguration, he has claimed to halt government borrowing and has also claimed that the government’s general budget will not have a deficit this year.
However, the International Monetary Fund says that the Iranian government needs the price of oil in the global market to be above $307 in order to prevent a budget deficit. This figure is more than three times the current oil prices in the global market.
The international institution also states that liquidity in Iran had a growth rate of 31 percent in the past year but will experience a 47 percent surge this year. This indicates the acceleration of printing banknotes without backing by the regime’s Central Bank.
According to the statistics of the IMF, the inflation rate in Iran was close to 45.8 percent last year, but it will reach its peak at 47 percent this year. Liquidity is the most significant factor in the price growth of goods and services.
For years, the Iranian regime has been compensating for budget deficits by pressuring the central bank to print money without sufficient backing, leading to rampant inflation in the country.
The evaluation by the IMF indicates that Iran’s inflation rate this year will be the highest after Venezuela, Zimbabwe, Sudan, Argentina, Suriname, and Turkey. The IMF estimates that Iran’s accessible foreign exchange reserves this year will be around $21 billion, which is only $1.5 billion higher than the previous year. Iran’s average foreign exchange reserves from 2000 to 2019 were over $70 billion.
New statistics from the Central Bank of Iran reveal that the country’s liquidity reached its peak in July, with a 27.5 percent increase compared to the same month last year, amounting to 66,940 trillion rials (approximately $129.854 billion). The Iranian regime’s Central Bank mentioned the growth of liquidity on August 12 without specifying its volume. However, an examination of last year’s statistics from the bank shows that liquidity reached the threshold of 67,000 trillion rials (approximately $129.854 billion).
Liquidity is the most important factor in inflation. The World Bank recently published a report indicating that Iran has the highest inflation rate for food items after Venezuela, Lebanon, Zimbabwe, and Argentina.
The latest update from the World Bank on global food inflation shows that food inflation in Iran during May of this year was 78 percent.
Since Ebrahim Raisi took office, liquidity in the country has grown by over 70 percent, equivalent to 27,730 trillion rials (approximately $53.792 billion).
The IMF states that in order to prevent a budget deficit this year, the Iranian government would need global oil prices to be $351, which is more than four times the current oil prices in international markets.
For the next year, Iran would require global oil prices to be $375; otherwise, the debt of Ebrahim Raisi’s government would increase by over $9 billion in 2024, and liquidity in Iran would experience a jump of approximately 33 percent.
