Oil price fuels external accounts

25 February 2003
High oil prices ensured that Iran's external accounts remained well in the black in the first half of fiscal 2002/03, new figures released by Bank Markazi (central bank) show.

Bank Markazi's latest figures, covering the period from 21 March to the end of September, show that oil and gas exports reached $9,795 million in the first half of fiscal 2002/03, largely due to the strong oil price, which remained in the upper half of OPEC's preferred price band of $22-28 a barrel throughout 2002. The performance was achieved despite crude production levels dropping to an average 3.4 million barrels a day during the first half of 2002/03, down almost 8 per cent on production in 2001/02.

The figures also suggest that oil and gas revenues for the whole fiscal year, ending 20 March 2003, will be similar to the $19,339 million in 2001/02. Since the autumn, Iranian output and oil prices have been rising as a result of the crises in Venezuela and - more importantly - Iraq.

First-half oil and gas receipts for 2002/03 accounted for 80.1 per cent of the government's total export revenues, which stood at $12,222 million, down 7.5 per cent on the corresponding period in 2001/02. The non-oil sector also increased its contribution to the external accounts. During the first half of 2002/03, non-oil exports reached $2,427 million, a year-on-year increase of 7 per cent.

Imports jumped by 20 per cent to $10,744 million in the first half of the Iranian year, resulting in the trade balance decreasing to $1,478 million, compared with $4,272 million in the corresponding period of 2001/02. A similar drop was recorded in the current account, which stood at $1,138 million compared with $4,215 million in the corresponding period last year.

Iran's positive economic performance in the past three years has led to a significant reduction in its gross external debt burden. Despite raising $675 million through its debut Eurobond issue in July, external debt stood at a manageable $8,338 million at the end of the first six months. While the figure represents a 16 per cent increase compared with the $7,214 million at the end of 2001/02, it is significantly below the $14,000 million in 1997/98. The Islamic republic's debt-to-gross domestic product (GDP) ratio remains relatively low by international standards at about 8 per cent, following December's second Eurobond issue (MEED 20:12:02; 12:7:02).

On the back of the recent strong economic performances, the Islamic republic has become a net external creditor. According to London-based rating agency Fitch, which assigned a B+ sovereign rating to Iran in 2002, net credit is projected to reach $28,000 million by the end of fiscal 2002/03.

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