Comments on the Iranian Economy - March 5th, 2014

(drawn from press reports and official publications)

By Dr. M. Javad Ardalan (ardalan@oxpe.co.uk)

Director of Oxford Persian Institute (www.oxpe.co.uk)

Iran's Consumer Index January to Feb 2014

The Central Bank of Iran (CBI) has announced the latest consumer index for the Iranian month of Bahman (21 January to 19 February 2014). The total index shows an increase of 0.4 percent compared with the previous month and 22.8% compared with last year. The biggest increase compared with last year is in the healthcare sector with an increase of 34.4%, while the communication sector with - 0.4% was the lowest. Compared to the previous month, the transport sector has had the biggest increase, with total growth of 1.3%, while the communication sector experienced the lowest rank by -0.1%. The inflation rate in the last 12 months ending in February 2014 compared with the same period last year was 36.7%.

Iran's Financial Sanctions

Valiollah Seif, the Governor of Central Bank of Iran (CBI), after the cabinet meeting on Wednesday March 5th, 2014 announced that Iran has received the first instalment of the payments on the Joint Action Plan. A Swiss bank is now added to the list of nominated banks for Iranian transactions. He also cited his recent visit to Switzerland as a sign of a growing banking relationship as well as precious metal transactions with Switzerland.

According to the Joint Action Plan, the first instalment of Iranian frozen assets is US$550 million. The delay in the payment has been the result of banking regulations. So far, US$550 million (which was held at the Central bank of Japan) was paid by Swiss National Bank on 5 March 2014 in Swiss Francs, and US$450 million (which was held in Japanese Yen) and was paid on 3 March 2014 and US$550 million was paid by South Korea.

Based on the Joint action plan, a total of US$4.2bn of Iranian frozen assets will be released to Iran. According to the White House (Office of the Press Secretary), the schedule for the payment of later instalments are as follows: US$550 million on 10 April, US$450 million on 15 April, US$550 million on 14 May, US$550 million on 17 June, US$550 million on 20 July.

Three Japanese banks agreed to co-operate with Iran in basic goods, pharmaceuticals and medical equipments. These banks are: Bank of Tokyo-Mitsubishi UFJ (BTMU), Sumitomo Mitsui Banking Corporation (SMBC) and Mizuho Bank.

Reza Ansari, chief manager of international affairs for CBI, in a letter to Governor of CBI mentioned that EN, Parsian, Pasargad, Karafarin, Sarmayeh, Saman, Maskan and Kishavarzi are Iranian banks which are not sanctioned by the EU and therefore can provide counterpart banking facilities.

Trade

Iranian International Trade Statistics (from March 21st 2013 to February 19th 2014)

According to Iranian customs administration, Iran's exports were US$37.3 billion and imports were US$42.8 billion during the first 11 months of the Iranian fiscal year (from March 21st 2013 to February 19th 2014). Compared with the same period last year, the country's exports, excluding oil and gas, and imports decreased by 1.5 and 12% respectively. Last year, Iran exported US$37.9 billion and imported US$48.6 billion.

The main export destinations were China, Iraq, UAE, India and Afghanistan. The biggest share of exports is petrochemical products, US$9.9 billion, which forms 26.38% of the total exports. The biggest imported commodity during this period was rice, with a value of $US2.1 billion, 4.9% of total imports. A considerable proportion of goods were imported from the UAE (21.6%) and China (19.7%). During this period, 22.8% of the imports were received from Europe, with Switzerland representing the largest country share of European imports (22.4%).

In the EU, the imports from Italy and Spain increased to US$61.3 million and US$26.2 million, respectively.

Banking and Financial Service

Iranian Central Bank (CBI) Bonds

The CBI has issued, and sold within 6 days, IRR 22,000,000,000,000 (£527.3 million) of six-months bonds with annual rate of 23 percent. This was 75 percent of the initial amount advertised by CBI.

Currency Market

The official (CBI) exchange rate is 1 GBP equal to IRR 41,725 and 1 US dollar is equal to IRR 24,916. The market price is IRR 50,800 per GBP and IRR 30,400 per US dollar as at 12 February 2014.

En Bank's HR growth

On February 28th 2014, EN Bank launched a plan to hire retired banking professionals for managerial posts in its branches in 30 different Iranian cities. EN Bank was the first private bank after 1979 revolution. Since November, the bank has been managed by its new CEO, Hassan Motamedi, who is an MBA graduate from United States and who has previously worked at senior management levels with the Central Bank of Iran (CBI) as well as on the Board of Tejarat Bank.

This content does not necessarily express the views of The British Iranian Chamber of Commerce. The views and opinions expressed are those of the author.