Iran: Growing Capital Outflow Threatens Economy Ahead Of Sanctions

Iran could be heading for a serious financial crisis if a massive capital flight of $59.4bn over the two years to March 2018 accelerates as planned US sanctions kick in from August.

Iran’s parliamentary think tank, the Majlis Research Center (MRC), in late May published a comprehensive report on the crisis in Iran’s forex market. This showed a doubling of capital outflows from $20.2bn for the Iranian year to March 2017 to $39.2bn the following year; outflows soared to $13bn for the last quarter of that year. And that was before the US pulled out of the nuclear deal.

The MRC also estimates Iran’s forex reserves fell $16.3bn between March 2016 and December 2017, compared to increases of $2.2bn in the year starting March 2015, $8.6bn in 2014 and $13.2bn in 2013. The decline in Iran’s reserves is primarily attributed to capital flight. This in turn has led to a steep depreciation in the Iranian rial. The $20.2bn outflow for the year to March 2017 equates to 36% of the value of Iran’s oil exports ($55.8bn).


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