Despite improvements to Iran’s economy and FDI prospects, it still has room for improvement to attract foreign investment – mainly in its banking system, the IMF has warned. This followed a visit to the country by IMF first deputy managing director David Lipton.
Iran’s FDI has increased dramatically following the lifting of sanctions resulting from the nuclear deal, the election of president Hassan Rouhani and his subsequent reforms to help globalise Iran’s economy. In just the first five months of 2016, the country has seen nearly four times as many FDI projects, and almost twice as much capital invested ($4.45bn) than the whole of 2015 combined.
Iran has already seen more projects than any year since 2003, the year greenfield FDI monitor fDi Markets began keeping track. Additionally, its oil exports are estimated to be 60% higher for May 2016 compared with the same month in 2015.
While acknowledging the positive steps Iran has made, Mr Lipton said some key issues with the banking system needed to be improved in order to fuel foreign investment.
“It will be critical to begin restructuring banks – both at their operational level and their high level of non-performing loans – to help lower real interest rates and stimulate credit to the economy,” he said. “Second, given the difficulties for Iranian banks in reintegrating to the international financial system, the authorities should persevere with strengthening the framework for anti-money laundering and combating the financing of terrorism.”