Iran achieves very low overall compliance with international standards and codes, with a score of 10 out of 100 in our Standards Compliance Index. Iran's compliance in the area of macroeconomic fundamentals is very poor. So, too, is its compliance in the areas of market infrastructure and financial supervision, except for accounting and auditing where Iran has constantly been realigning its accounting and auditing standards to suit the continuously revised international standards. Iran has also declared a commitment to subscribing to the International Monetary Fund's Special Data Dissemination Standard. Beyond this, there is a significant lack of information on Iran's regulatory practices, and in most areas it requires serious reforms to come close to international best practices.

Macroeconomic Policy and Data Transparency

Iran does not subscribe to either the International Monetary Fund's Special Data Dissemination Standard (SDDS) nor its General Data Dissemination System (GDDS). In 2004, however, the IMF's Article IV Consultation with Iran noted that Iran's authorities had declared a commitment to achieving SDDS compliance, with the ultimate aim of subscribing to the SDDS. The IMF's 2006 Article IV Consultation (published in 2007) deemed Iran's statistical data to be adequate for surveillance purposes, but noted continued inadequacies in the both timeliness and availability of data outside the context of an actual IMF mission. Consistency of fiscal data has shown some improvement, but work remains to be done. Dissemination standards are, as yet, not up to par for SDDS subscription. More »

There is not enough publicly available information to permit an assessment of Iran's compliance with the Code of Good Practices on Transparency in Monetary Policy. However, the International Monetary Fund (IMF) has long stressed the importance of greater independence for the Central Bank of Iran (CBI) in order to enhance both the transparency of its monetary policy activities and its overall credibility. Draft legislation is currently in the works to attain this goal, but it has yet to be passed. The IMF recommends that Iran's monetary policy be less subordinated to fiscal policy, and that greater data reliability can be achieved by harmonizing sectorization, categorization, and residency criteria with internationally accepted standards and principles. In August 2007, the conflict between the CBI and Iranian President Ahmadinejad over his constant intervention into CBI policy, which had already resulted in the president dissolving the Money and Credit Council, the monetary policy-making body of the CBI, led to the resignation of CBI Governor Ebrahim Sheibani in protest. More »

Although Iran has taken steps since 2000 to improve its fiscal policy transparency, it is not currently in compliance with International Monetary Fund (IMF) fiscal transparency standards. It does not meet the specifications required to subscribe to either the IMF's Special Data Dissemination Standard or the less rigorous General Data Dissemination System. While implicit energy subsidies are now acknowledged in the annual budget (since 2002), other implicit subsidies, such as those to the "revolutionary foundations" remain off-budget, distorting the fiscal picture. The adoption of General Financial Statistics Manual (2001) categories for the reporting of core government operations is a good first step, but this practice should be extended to all agencies involved in the budget process. The cash-based accounting system needs to be improved upon, as well. The budget process must be streamlined, and the Five-Year Plan should be revisited annually to account for and accommodate changes that may materially affect its assumptions and estimates. More »

Institutional and market infrastructure

The World Bank's "Doing Business" project website provides an assessment of the economies of 175 countries regarding their performance in a number of categories, including "Closing a Business." Three indicators are used to compare country performance: the average time to bring a business closing to completion (in years), the average cost (as a percentage of the estate), and the average recovery rate, provided in terms of cents on the dollar. For this category, the World Bank ranks Iran as 109th of the 175 countries included in its survey. However, there is insufficient publicly available information regarding Iran's compliance with the Principles and Guidelines for Effective Insolvency and Creditor Rights Systems developed by the World Bank. More »

The Islamic Republic of Iran Audit Organization (IRIAO) sets the National Accounting Standards (NASs) in accordance with IFRSs (formerly known as the International Accounting Standards (IASs)), issued by the International Accounting Standards Board (IASB). IFRSs are being constantly revised to keep up with changes in global financial practices and trends. Consequently, to maintain the level of compliance, the IRIAO has also been introducing new projects for incorporating revisions into NASs. According to IRIAO website, as of August 2007, amendments of NASs aimed at harmonization with international standards were in process. On its website, in a chart comparing NASs and IFRSs, the IRIAO accounted for 9 NASs which made "minor departures" from the revised IASs, and 10 IFRSs that had not been adopted as of August 2007. More »

There is very little information publicly available about corporate governance practices in Iran, let alone on its compliance with the Organization for Economic Cooperation and Development's Principles of Corporate Governance. A 2000 publication on doing business in Iran reported that Iran's business and investment environment is governed by unclear and unpredictable laws. The 2006 report on the International Monetary Fund's Article IV Consultation with Iran indicates that investor protection is weak, measured by an index including different aspects of corporate governance. However, the 2006 Securities Act is intended to protect investors against unfair and practices and fraud, and ensure the adequate and timely disclosure to the public of information on companies issuing securities. More »

In consultation with the Iranian Association of Certified Public Accountants (IACPA) and other regulatory bodies, the Islamic Republic of Iran Audit Organization (IRIAO) issues standards and guidelines on accounting, auditing, code of professional ethics and also code of ethics for personnel in accordance with Islamic rule. In a May 2007 self-assessment report prepared for the International Federation of Accountants (IFAC), the Iranian Institute of Certified Accountants (IICA) noted that the IRIAO had established convergence of national auditing standards with International Auditing and Assurance Board (IAASB) pronouncements as a formal objective. In 1998, thirty auditing standards based on the International Standards on Auditing (ISAs) were adopted with effective date of March 20, 1999. However, the IAASB revised the standards in 2004. To keep up with the revisions in ISAs, the IRIAO, according to Iran Daily 2005 article, prepared seven new standards and was in the process of revising existing standards. More »

Currently, Iran does not have a functioning Anti-Money Laundering (AML) framework in place, according to the International Monetary Fund's (IMF) 2006 Article IV Consultation report (published in 2007) and a 2007 report by the U.S. Department of State (DoS). The IMF's Article IV report identified two key flaws: first, the lack of an AML framework; second, major shortcomings in Iran's framework for combating the financing of terrorism (CFT). The IMF report also notes that, although Iran has been working with the IMF to develop draft AML and CFT laws, the draft laws in their current form do not adequately address Financial Actions Task Force's requirements. The IMF's report makes three key recommendations: Iran should properly criminalize of money laundering, expand the number of entities covered by the AML framework, and establish a functioning Financial Intelligence Unit (FIU). According to the 2007 report by the U.S. DoS, the U.S. has designated Iran a State Sponsor of Terrorism. More »

The International Monetary Fund, in its 2005 Article IV on Iran report, published in 2006, mentions that a real time gross settlement (RTGS) system referred to as the Rial interbank market is expected to become operational in 2006-2007. The Central Bank of the Islamic Republic of Iran has stressed the urgent necessity of reform in the Payment and Settlement Systems in Iran to standardize them and develop value-added services in line with international best practices. However, there is little information publicly available regarding Iran's compliance with the Core Principles for Systematically Important Payment Systems (CPSIPS) promulgated by the Bank for International Settlements (BIS). More »

Financial Regulation and Supervision

According to the 2006 Article IV Consultation Report by the International Monetary Fund (IMF), published in 2007, Iran has continued with reforms to strengthen banking supervision and has introduced significant changes in the financial sector through the adoption of a number of the 2000 Financial Sector Assessment Program (FSAP) recommendations. It has, however, achieved limited progress, and substantial work still needs to be done. The steps taken so far, as mentioned in the report, have been to move from compliance-based to risk-based prudential supervision, to update its information technology, and to consolidate the banks' internal control mechanisms. The IMF also affirms that Iran is working to bring more financial institutions under the supervision of the Central Bank of the Islamic Republic of Iran (CBI), the country's financial regulator. Looking forward, the IMF points to the need to revise Iran's legal framework so that it clearly spells out the provisions for CBI autonomy, accountability, and effectiveness in supervisory matters. The IMF also recommends that several prudential regulations be refined; that on-site inspection be fully integrated with off-site research; and that enforcement be strengthened. Further, the IMF report calls for increased CBI independence, the elimination of administrative controls, and the facilitation of greater exchange rate flexibility. Despite all this, however, there is little information directly addressing the compliance of Iran with the Basel Core Principles. More »

The 2005 Law Governing the Securities Market in the Islamic Republic of Iran Securities and Exchange Commissionestablished the Securities and Exchange Commission, responsible for supervising the capital markets. In addition, according to the Tehran Stock Exchange Corporation, the new Act improved regulation of the primary market, instituted punishment for insider trading, incorporated the Tehran Stock Exchange (TSE) and established a Central Securities Depository. Its implementation, in 2006, separated the supervision and operation of the TSE. This law will seek to ensure the efficient functioning of securities markets; protect investors against unfair and fraudulent practices; ensure that adequate and timely information is provided to investors and the general public on companies issuing securities; and regulate activities of market intermediaries. There is not, hHowever, enough there is insufficient publicly available information to make an assessment as to compliance with the International Organization of Securities Commissions (IOSCO) Principles of Effective Securities Regulation. More »

In 2001 the Guardians Council (Iranian Upper House) ratified the Bill for the Administration of Private Insurance Companies. The bill's primary goal was to improve Iran's insurance industry competitiveness and efficiency. The bill however, made clear that supervision and issuance of insurance schemes will continue to be to be part of government duties. The Central Insurance Authority of Iran (CIAI) is the regulator of the insurance sector. In 2004, the International Monetary Fund (IMF) in its country report on the Islamic Republic of Iran noted that the Iranian insurance regulatory framework was "outdated and very small" and that "authorization and licensing" of private insurance companies would be beneficial for the development of the sector. As of 2004, according to the IMF report, little progress was made in the direction of supervision or regulation. The process of privatization was not found adequate either. More »

Legend:

Credit Ratings

Moody's Not rated

Fitch B+/Stable

Standard & Poor's Not rated

Macroeconomic Data

2007 GDP (Current Prices): 294.089 billion USD (IMF)

2007 GDP (Per Capita): 4,149 USD (IMF)

2008 GDP (Growth Forecast): 5.8% (IMF)

2008 Inflation (CPI): 20.7% (IMF)

2007 Unemployment: 11% (CIA)

2006 Foreign Direct Investment

FDI (Inward): 0.901 billion USD (UNCTAD)

FDI (Outward): 0.386 billion USD (UNCTAD)

2006 Official Development Assistance

ODA (Received): 121 million USD (OECD)

ODA (Disbursed): N/A million USD (OECD)