IMF sees Iran success with inflation, subsidies

The IMF, which held regular consultations in Iran from May 28 to June 9, said strong growth in non-oil sectors and good performance in agriculture helped the country recover to 3.5 percent growth in 2009-10 despite a fall in oil prices.

Iran has achieved "early success in the implementation of their ambitious subsidy reform program" with increases in prices of energy, public transport, wheat, and bread having removed almost $60 billion of subsidies, the IMF said.

"At the same time, the redistribution of the revenues arising from the price increases to households as cash transfers has been effective in reducing inequalities, improving living standards, and supporting domestic demand in the economy," the statement said.

The subsidy cuts would temporarily raise the inflation rate, but also improve Iran's medium-term growth outlook by boosting efficiency in energy use, increasing export revenues and strengthening overall competitiveness, it said.

"Maintaining macroeconomic stability in the near term through coordinated and adequately tightened monetary and fiscal policies is essential to preserve the benefits of the subsidy reform," the statement said.

The IMF noted that high international commodity prices and Iran's large-scale privatization program had helped drive high prices in the stock market, underscoring the financial sector's key role in driving economic growth.