TEHRAN: Iran should ban imports of luxury and non-essential goods given falls in crude oil prices, central bank chief Mahmoud Bahmani was quoted yesterday as saying, in a sign the Opec producer is concerned about sliding oil income.
Officials say Iran’s international isolation means it is more immune than others to the world financial crisis but the governor’s remarks reflect growing concern about one consequence of the turmoil – tumbling oil prices.
The world’s fourth biggest crude exporter and No 2 Opec producer has become increasingly reliant on higher oil prices to balance its books. Some analysts say Iran needs its crude at $70 to $75 a barrel to keep its current account in the black.
Oil has tumbled to half the record of $147 a barrel set in in July, with US crude trading at about $72. Iranian crudes tend to sell at a discount to the US benchmark, which means prices are close to or below levels some estimate Iran needs.
“In view of the drop in the world price of oil in the past three months, there exists the possibility of not realising part of the projected budget income,” Bahmani was quoted as saying in the Jahan-e Eqtesad daily.
Bahmani said Iran was affected “minimally” by the financial crisis but added: “It would be necessary through economising to ban the import of luxury and unnecessary goods and strengthen the foreign exchange savings account.”
Another central bank official this month said the oil price slide rang an “alarm bell”.
Oil Minister Gholamhossein Nozari has been at the forefront of those in the Organisation of Petroleum Exporting Countries calling for a reduction in output to stem the fall.
President Mahmoud Ahmadinejad, who is expected to run again for the presidency in 2009, has said Iran is more immune than others to the financial crisis. UN and US sanctions over its nuclear plans mean Iran has increasingly few links with Western banks.
But analysts say the government, already under fire over policies blamed for stoking inflation, cannot be complacent.
Iran may have “weaned itself off the world economy”, wrote Iran News, “but an important factor many Iranian officials might have forgotten is the declining crude prices”.
“So, how can the government afford its huge imports with cheap oil?” the English-language daily asked in a column.
Imports have surged with rising oil income, which hit $70bn in the year to March 2008. Central bank figures show imports rose 13% to $56.6bn in 2007-’08 over a year before. They rose 19% in the first quarter of 2008-’09.
Government critics say soaring inflation, which is running at 29% and which they have blamed on government spending, has undermined local competitiveness and encouraged imports.
The government has a reform programme, including moves to streamline subsidies and imposing a sales tax, but merchants and the public have opposed the plan, fearing even higher inflation. Economists, including the International Monetary Fund, say Iran must change its policies to stay in the black. – Reuters |
