IMF sees Iran economy recovering this year but inflation still on the up

DUBAI, April 11 (Reuters) - The International Monetary Fund expects inflation in Iran to rise further this year and called for reforms as the economy recovers from the coronavirus crisis.

Iran was badly hit by the COVID-19 pandemic last year, which intensified economic pressures coming from sanctions that curb oil sales vital for the OPEC producer.

Inflation is expected to rise to 39% this year from 36.5% last year, the IMF has estimated.

"We expect the Iranian economy will turn into positive growth this year and next year," Jihad Azour, director of the IMF's Middle East and Central Asia Department, told Reuters.

The IMF had estimated in October last year Iran's economy would shrink by 5% in 2020 but has revised upwards its estimate to a 1.5% growth in 2020 and a 2.5% growth this year, it said in its World Economic Outlook report last week.

"Going forward it’s important to start dealing with some of the weaknesses that exist in the economy," Azour said.

"To address the issue of inflation it’s important to address the issue of the multiple currency regime that exists in Iran, and this is something that would help not only address inflation but also improve the overall macroeconomic stability."

The Iranian rial official rate is set at 42,000 to the U.S. dollar, but its market rate stood at around 250,000 against the dollar last week, according to foreign exchange website

Azour said improving financial inclusion, reforming the financial sector and state-owned enterprises should be a priority, as well as providing more space to the private sector, which would help create jobs.

Unemployment will rise to 11.2% this year and 11.7% next year from 10.8% in 2020, the IMF has estimated.

The Islamic Republic asked the IMF last year for $5 billion in emergency funding to help it fight the coronavirus outbreak.

Azour said the request was still being studied "in order to get the necessary information to assess the balance of payment need and also the repayment capacity and debt sustainability."

Reporting by Davide Barbuscia Editing by Mark Heinrich

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