The U.S. plans to block Iran’s request for a $5 billion from the International Monetary Fund (IMF) to fight the Coronavirus epidemic, according to Western media reports. The U.S., the IMF’s largest shareholder, claims that Tehran plans to use the funds to support “adventurism abroad, not to buy medicine for Iranians.”
In comments reported by the Tasnim News Agency on the same day, Iranian President Hassan Rouhani warned against the IMF rejecting the loan.
“It would be unacceptable for the IMF to refuse Iran’s loan application, which it needs to fight coronavirus,” President Hassan Rouhani said. “We are paying the IMF and the World Bank our share, and part of our reserves are at their disposal. It is unacceptable if they discriminate against us when considering our loan application.”
The governor of the Islamic Republic Central Bank, Abdolnaser Hemmati, made a formal request to the IMF for the loan on March 16.
“I wrote a letter to [IMF Managing Director] Kristalina Georgieva on March 16, requesting $5 billion in financial aid for Iran, under the IMF’s expressed commitments to help its members, including Iran, to fight the spread of coronavirus,” Mr. Hemmati said in a tweet in late March. “We have asked for $5 billion in financial help under the IMF’s Rapid Financing Instrument (RFI) scheme.”
The IMF recently published a list of 28 countries that will receive funds to fight coronavirus. Iran hopes to get a share of the money. Except for India and Argentina, the rest of the countries on the list are members of the International Development Association (IDA).
IDA countries have low per capita incomes which prevent them from borrowing from the WBG’s lending wing, the International Bank for Reconstruction and Development (IBRD).
The IMF may reject Iran’s loan request because, earlier this year, the Financial Action Task Force (FATF) blacklisted the country for failing to enact the Palermo Convention, the Countering the Financing of Terrorism (CFT) and Anti-Money Laundering (AML) acts.
Even if the IMF were to approve Iran’s loan application, it would be in the form of a letter of credit and not cash, to buy only medicine and medical devices. The U.S. will still have to give the green light before the IMF approves the credit facility.
According to the IMF’s 2019 annual report, Iran has $103 billion in foreign currency and gold reserves which it could dip into to fund its fight against coronavirus. Iran can also access massive cash reserves from other sources under the direct control of the Supreme Leader Ayatollah Ali Khamenei, including Astan Qods Razavi, an administrative organization that manages the Imam Reza Shrine, in Mashhad, the capital of the northeastern province of Khorasan Razavi.
Iranian officials had taken comments by Jihad Azour, director of the IMF’s Middle East and Central Asia Department, as a sure sign that the IMF would approve their loan request.
“The IMF is in dialogue with Iranian authorities after Iran’s request for financial aid to help it contend with the fallout from the coronavirus pandemic,” Mr. Azour said during a virtual panel discussion moderated by the Carnegie Middle East Center on April 1. “The IMF is in talks to understand Iran’s needs and what is required for Iran’s demand to be processed.”
A week later, Alireza Rahimi, a member of the Majlis (Iranian Parliament) presidium tweeted: “There is significant support for Iran’s request for a $5 billion loan, including Dr. Azour’s. The funds can speed up the fight against coronavirus. Correct management and fair distribution of resources throughout the country could ensure our victory in this fight.”
Iranian officials have continued to condemn the U.S. for trying to block Iran’s loan application.
The Secretary of the Supreme National Security Council of Iran, Rear Admiral Upper Half Ali Shamkhani, tweeted on April 5: “Imposing sanctions on medical aid is illegal and inhumane. It exposes [President Donald] Trump administration’s deep-seated animosity towards the Iranian nation. The attempt by the U.S. to block Iran’s loan request from the IMF, which it needs to buy medicine and medical devices for its fights against coronavirus, tantamount to a crime against humanity.”
In comments reported by the Mehr News Agency on April 7, Mohammad Javad Haghshenas, the chairman of the social and cultural committee of Tehran City Council said: “The Foreign Currency Reserve, The Execution of Imam Khomeini’s Order (EIKO), Astan Qods Razavi, banks and all other institutions should join forces in the fight [against coronavirus]. The armed forces, the government, and the private sector, and people should all take part.”
Stringent financial and banking sanctions would, however, make it next to impossible for Iran to repay the loan, even if the IMF were to approve the request.
During his weekly remote video press briefing on April 6, the government Spokesman Ali Rabiei sidestepped questions about the U.S. efforts to block Iran’s loan request.
“The governor of Iran’s Central Bank is in a better position to answer this question,” Mr. Rabiei said. “The outbreak of coronavirus has emboldened America. Washington is exploiting the situation and ignores all humanitarian appeals.”
“Europeans have taken measures to release Iranian funds in other countries. We must thank the Foreign Minister [Mohammad Javad Zarif] and Iran’s Central Bank for their efforts. There have been promising developments which we will discuss at a later date. We are trying to free our assets in foreign countries and use them to provide better healthcare in Iran.”
There is, however, no guarantee that the money released by the European countries will not end up in the hands of the Islamic Revolutionary Guards Corps (IRGC) to fund its military campaigns.
There seems to be some mistrust among the leaders of the Islamic Republic. It took 11 days before Mr. Khamenei allowed President Rouhani to tap into the National Development Fund of Iran (NDFI) and allocate 1 billion euros to the fight against coronavirus. NDFI is Iran’s sovereign wealth fund, which was founded in 2011 to supplement the Oil Stabilization Fund. It is independent of the government’s budget.
“The supreme leader has allowed the government to access 1 billion euros of the sovereign wealth fund,” the hardline Tehran-based Kayhan newspaper wrote. “The government must explain how it plans to spend this money.”
“The esteemed president and the Planning and Budget Organization must tell us how they intend to spend the 1 million euros they received from NDFI to fight coronavirus,” Parvaneh Mafi, a Majlis deputy representing Tehran, Rey, Shemiranat and Eslamshahr electoral district tweeted on April 6. “They must be transparent and publish the specifics of their plan on the Planning and Budget Organization’s website and let the public know how they intend to spend the money.”
Tehran is exploring all and every avenue to secure the $5 billion loan from the IMF. It may ultimately have to promise not to fund Hezbollah, the Popular Mobilization Forces, and other Shia militia groups. Several of the countries that have received loans from the IMF are plagued by endemic corruption, but none sponsor international terrorism or threaten other nations.
“IMF Managing Director Kristalina Georgieva is preparing to offer short-term dollar loans to countries that lack enough Treasuries to take part in a Fed program that enables foreign central banks to exchange U.S. debt for dollars temporarily,” Bloomberg reported on April 6. “Georgieva has repeatedly touted the IMF’s readiness to deploy its $1 trillion lending capacity to fight a virus it initially failed to identify as the massive threat to global growth it now poses.”
Meanwhile, several economists have warned that many countries may not repay IMF loans, which could lead to an economic crisis.
[Translated from Persian by Fardine Hamidi]