Iran is set to release July’s inflation figures today. The change from June’s 11% rate will be a key indicator for the Islamic Republic’s economy.
Having just launched his second term, one of President Hassan Rouhani’s top challenges will be reforming Iran’s banks. Though many financial sanctions were lifted following the 2015 nuclear agreement, many banks must still change their rules to comply with international standards, slowing the Islamic Republic’s integration into the global financial system.
Beyond that, the banking sector is threatened by risky loans that were made under Mahmoud Ahmadinejad, Mr Rouhani’s predecessor from 2005-2013. A total of $346 billion is owed from loans, with some banks having non-performing loan rates as high as 40%. If that rate is not tamped down, it could force banks into bankruptcy and potentially force government bailouts to salvage the economy.
Expect inflation rates to see only a small change, fitting with the government’s target. A big swing in either direction would add another complication to Tehran’s banking woes.
Nicholas is an Italian politics aficionado. Nick brings his knowledge of southern Europe to bear in The Daily Brief team, where he serves as a senior analyst and editor.