The preliminary results of Islamic Republic of Iran's parliamentary elections held on February 20 are a clear setback for the movement towards social and political reform, says Fitch Ratings.
The agency considers political risk to be one of the most important constraints on Iran's sovereign ratings, and warns that the shift from a reformist to a conservative parliament could heighten political risk if it is accompanied by reform reversals. Iran's Long-term foreign currency and local currency ratings are B+ with a Positive Outlook.
Based on the dismissal of large numbers of reformist candidates by the Guardian Council, the election boycott by some of the major reform groups in response and the inability of the entire process to stir much voter interest, the election outcome was not unexpected. "What is most disturbing is that political debate seems to be taking place largely amongst politicians and the authorities in the various councils," says Senior Director of Sovereigns, James McCormack.
Voter turnout has been reported at 51 percent, which is low compared to past elections and considering the concerted effort by the country's leaders to encourage people to vote. "One way to interpret this is that people have turned away not only from the reform movement, which is often criticized for its lack of achievements, but also from the political process itself," McCormack adds.
In Fitch's view, there are potential medium-term concerns associated with the public's political disengagement. If the political and social agendas that are set and enacted by the authorities become less reflective of public sentiment over time, there is a risk of increased friction and disagreement. However, the agency emphasizes that it does not expect any political instability in the short term, and that there is no evidence of any disruptive medium-term developments.
Economic reform was not a major election issue, but is set to continue under the Third Five-Year Development Plan (FYDP), which concludes in March 2005. The Fourth FYDP is well advanced, with its principles already agreed among all of the relevant institutions involved in planning and implementing policy.
Fitch expects privatization to be accelerated, possibly including some of the state-owned banks, further trade liberalization, tax reform, the introduction of more clearly delineated roles for the Oil Stabilization Fund and a change in the relationship between the state and the national oil company that would allow the latter a greater degree of independence and enhance fiscal transparency.
Although Parliament has not been a significant force in initiating or promoting economic reform, Fitch will monitor whether it now begins to slow the process. — (menareport.com)
© 2004 Mena Report (www.menareport.com)
