The International Monetary Fund (IMF) states in its latest quarterly report that the Iranian government needs the price of each barrel of oil in the global markets to be more than $121 to avoid a budget deficit in 2024.
This comes at a time when the price of Brent crude oil, which is even more expensive than Iranian oil, is trading at less than $90, and this international institution has predicted that the average price of Brent oil this year will be below $79.
The report also does not consider Iran’s discounts to Chinese refineries, but Reuters had previously reported that Iran offers about $13 discount per barrel of oil to Chinese customers.
The IMF report, released on April 28 under the title “Regional Economic Outlook for the Middle East and Central Asia,” further states that last year, Iran’s daily oil production increased by half a million barrels due to increased exports, reaching 3.1 million barrels, but such continuous growth is not expected, and only 100,000 barrels will be added to Iran’s daily oil production this year.
The IMF also predicts that the government’s debt and debts of government subsidiaries will increase by more than $4 billion compared to last year, reaching $118 billion, which is equivalent to more than one-fourth of Iran’s economy.
The IMF’s criterion for calculating Iran’s economic indicators is the official Nima exchange rate of the dollar (Nima dollar is distributed in Iran’s Integrated Forex System to provide the necessary currency for imports and exports) and some of its data is taken from the Iranian government itself. Currently, Nima dollar rate is about 410,000 rials, while the market rate for each US dollar in the free market is about 620,000 rials.
Earlier, the Central Bank of Iran also reported that the government’s and state-owned companies’ debt to the country’s banking system increased by about 56 percent in 2023, reaching a peak of 13,100 trillion rials (approximately $21.797 billion).
The government’s debt to banks is only a small part of its total debts. The largest share of government debt is related to borrowing from the National Development Fund, which, according to the institution’s report, the government owes more than $100 billion to, and has stated that the government “cannot settle its debts.”
Due to severe budget deficits in recent years, the Central Bank has been forced to print banknotes without backing to be able to borrow from banks and other financial institutions in the country.
This has led to a significant increase in liquidity in the country; so much so that, according to the IMF’s assessment, liquidity in Iran has surged by nearly 35 percent over the past year and will increase by 33 percent this year.
Such a significant surge in liquidity has led to a depreciation of the rial and rampant inflation.
The IMF assessment indicates that inflation in Iran was 41.5 percent in the past year and will be 37.5 percent this year.
However, this estimate reflects data provided by the Iranian Statistical Center to this international institution, but the Central Bank of Iran recently stated in a subsidiary report related to the calculation of debt settlement and dower that last year’s inflation rate was above 52 percent.
