Iran Snapshot: IMF Defends Its Cheerleading for Tehran's Economy

Since the spring, we have noted and criticised the International Monetary Fund's optimistic "reports" on the Iranian economy, which appear to be driven more by advocacy for subsidy cuts and reliance on the statistics claimed by Iranian officials than on any substantive analysis.

Now the IMF tries once more to vindicate its efforts --- in a letter to the Wall Street Journal, which has also posted sceptical articles on the reports --- the Fund's Ratna Satay, in the Middle East and Central Asia Department, insists, "Our projections remain independent of the authorities' views; indeed, the growth forecasts for 2011-12 are lower than the authorities' and below past trends despite the higher potential brought about by the subsidy reform."

Satay claims the IMF's projections of Iranian growth, with lower-than-expected inflation and fiscal stability, come from "statistics we collected in a recent mission which indicated an exceptional agricultural performance in the past two years as well as the positive impact of the high oil prices on a highly diversified Iranian economy".

I am not sure how, but Satay has managed to produce an "explanation" even weaker than the original puff-piece for the Government's economic policy.

1. Saying that the IMF produced a report marking the Iranian economy as "Very Good" rather than the official line of "Excellent" does not constitute independence. Satay does not confront the original point that the IMF's assessment relies on the data --- real or fictional --- provided by Iranian authorities.

2. Instead, Satay reinforces that point. Look at her two supposed examples of independent assessment.

A. There is no data in the IMF report for the "exceptional agricultural performance" she asserts. And that is an assertion that flies in the face of contrary information --- downturns in Iranian production, pressure on producers over rising input prices (especially energy) after subsidy cuts, increasing imports, and escalating costs of food for consumers --- which is easily available.

B. Saying that Iran has benefited from the "positive impact of high oil prices" is not a tribute to Tehran's economic policy --- it is an inadvertent critique of a strategy with a heavy reliance on the good fortune of the price remaining high.

The give-away in Satay's explanation comes in six words near the end: "the need to continue with reforms". The IMF wants subsidy cuts, and if the Ahmadinejad Government pursues them, the actual management and performance of the economy --- and the impact on the Iranian people --- is a distraction.