Iranian government announces new economic policy package

The Iranian government recently announced its new economic policy package to help the country emerge from stagflation. This policy is focused on expanding domestic demand, resolving financial shortages and obstacles faced by the country as a result of the western sanctions.

The government is also looking to improve Iran's economic efficiency, especially considering the access to limited resources.

The government plans to boost the economy through a number of financial and foreign exchange policies, and at the same time improved ease of doing business will also help develop the economy.

The new economic policy will help stimulate economic growth through channeling economic resources towards the most efficient economic sectors in order to boost exports and reduce dependence on oil revenues. It focuses on four main areas-

• Macroeconomic policies

• Policies on ease of doing business

• Financial policies

• Economic stimulants

The government has been working toward reducing the rising inflation through monetary regulation and macroeconomic stability. The new policy has helped the government reduce inflation over the past 12 months from 37.5% to 27.7%.

The dual currency exchange system has impacted the economy, which the government hopes to resolve by stabilizing the currency exchange regime and bring down costs in the manufacturing sector.

The government hopes that stable currency and predictable inflation could lay the foundation  for macroeconomic stability.

The new economic policy will focus on eliminating dual currency exchange regime, lowering currency exchange regulations and improve the flow of foreign investment.

Financial restrictions by the banks in their lending to the manufacturing sector has also affected growth, primarily becuase of the increasing government debt.

The repayment of debt could help boost credit expansion and domestic production.

The government is planning to improve ease of doing business through less intervention in the market in terms of pricing goods and services. SMEs have had restricted access to financial resources and bank credits. Thus the banking and credit policy included in the new policy will help regulate the banking sector.

Non-oil exports will help improve domestic demand and reduce dependence on oil revenues and diversify the country's financial resources.

The oil, gas and petrochemical sectors hold a crucial position in the Iranian economy. Backward and forward linkages with several sectors across the economy could help boost production and growth.

This new policy will put emphasis on boosting energy production and consumption efficiency. The Iranian government has adopted the following policies-

• Investment in roads and public transport, introduction of 17,000 buses and 37,000 taxis across the country

• Improving the efficiency of the national railways

• Increasing the country’s gas exports

• Producing 700,000 barrels of crude oil per day from West Karoun oilfield

• Boosting petrochemical exports from $9.9 billion currently to $12.2 billion in 2014-15

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