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Iran takes steps against "Dutch Disease”

29 March 2015 13:16 (UTC+04:00)
Iran takes steps against "Dutch Disease”

By Sara Rajabova

Iranian government has taken steps to protect the country’s economy from “the Dutch Disease” in an attempt to cope with the effects of the sudden increase in the incomes.

Ali Tayyeb-Nia, minister of economic affairs and finance said the country has taken required measures to deal with the impacts of an anticipated surge in revenues should the sanctions against the country are removed as a result of success in nuclear talks with P5+1 group of countries.

He has emphasized that serious plans have been devised to cushion the economy against what is internationally known as “the Dutch Disease”.

“Our biggest concern today is that once the sanctions are removed and revenues increase, we fail to properly exploit the incoming petrodollars,” Tayyeb-Nia told the Persian-language magazine Tejarat-e Farda.

An expected final nuclear deal that envisages lifting of sanctions on Iran is considered to boost Islamic Republic’s incomes.

“We are concerned that the Dutch Disease returns, what Iran has experienced for several times before,” Tayyeb-Nia said.

The Dutch Disease is defined as a development through which a large inflow of foreign currency into a given country makes its manufacturing sector less competitive.

He further stressed that Iran has learned lessons from previous experiences when it saw a surge in its revenues. They, he said, include the junctures when the country sold oil at record high prices but “failed to properly use the extra money”.

“We should naturally try to direct the extra revenues into the National Development Fund and thereon use them for productive projects and efficient investments by the private sector,” Tayyeb-Nia said.

However, the country also stands ready against the negative impacts of the nuclear negotiations. Iranian government has repeatedly stated that the country has prepared measures to struggle economic challenges in case Tehran and the world powers fail to come to an agreement.

Tayyeb-Nia stressed that the government of President Hassan Rouhani has devised a specific scenario to deal with the economic impacts if Iran-P5+1 talks fail.

While, he did not elaborate what specific plans the government had in mind to deal with the economic impacts of the failure of sanctions, Tayyeb-Nia emphasized that the government stands completely ready to prevent any shock to the Iranian economy no matter what the outcomes of Iran nuclear talks will be.

“If we proceed based on reason and our domestic capabilities, we will suffer less. A year ago, nobody may have believed that the government of President Rouhani would be able to decrease inflation. But you can see that this was materialized,” said Tayyeb-Nia.

Iran is currently in talks with P5+1 – the United States, France, Britain, China, Russia and Germany – over the removal of sanctions that have been imposed over disputes on the Iranian nuclear energy program.

The sides have a deadline approaching within the next several months to reach a comprehensive deal that envisages curbing the nuclear program and the removal of sanctions.

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Sara Rajabova is AzerNews’ staff journalist, follow her on Twitter: @SaraRajabova

Follow us on Twitter @AzerNewsAz

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