Deputy governor for foreign exchange affairs at the Central Bank of Iran (CBI) says the country's foreign liabilities are amongst the lowest in transitional economies.

This he says has led to an improvement in Iran's credit rating abroad and it means Iranian letters of credit (L/Cs) are now much better received than they used to be.

Improvements

"Iran is in a favourable position in terms of debts and is among the countries with relatively low debt," Mohammad Jafar Mojarrad said. Total liabilities are now less than 10 per cent of gross national product (GNP), said the central banker who describes this as a considerable improvement compared to figures recorded in the mid 1990s.

Iran's gross domestic product (GDP) is about US$635 billion compared with US$158 billion and US$162 billion in 1994 and 1995 respectively.

Debt reduction

"Shrinking debts have pushed the [credit] risk rate lower," Mojararrad told the Fars news agency, adding that CBI's assets as well as the state's overall foreign exchange reserves have increased in the last few years.

Iran has made significant strides over recent years to reduce a debt mountain, much of which was accumulated during its war with Iraq during the 1980s. The country has made debt reduction a priority since it was forced in 1992 to reschedule much of its foreign debt.

Mixed basket

Mojarrad said CBI is mainly holding non-dollar reserves in its currency basket, more than 60 per cent of which is filled with euros, Swiss francs, British sterling and Japanese yen.

The bank's policy has been to increase its euros holdings he said but concedes that this has not been followed in earnest.

Better received

Since Iran began chipping away at its debt mountain it has gradually improved access to longer-term financing according to Mojarrad.

As a result, he says Iranian L/Cs are much better received now than they were two years ago.

This article represents the views of the author and not necessarily those of the ICC or any of the other partners in DC-PRO.