Promise to Reform

In his hurry to build roads, dams and schools (and on the upkeep of his regime), Iran's handsome Shah Mohammed Reza Pahlevi has spent all the $265 million a year his country gets from oil revenues and quite a bit more. Now Iran faces a balance of payments deficit of $130 million over the next two years. Until recently, the Shah has ignored the unpopular advice of Western economic advisers, who told him the deficit could have been avoided by vigorously curbing domestic inflation, and by clamping down on the import of luxury items that use up the hard currencies desperately needed for economic development.

Last week, on the Shah's promise to make the required reforms, the International Monetary Fund promised to advance $35 million, and to forbear collecting another $17.5 million lent to Iran earlier for monetary stabilization. The U.S. also agreed to come through with additional credits. In return, Iran promised 1) to tighten up on unnecessary imports, 2) reduce government spending not needed for economic development, 3) halt the inflation of bank credit that last year alone boosted Iran's price level 20%.

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