Notes on Development in Iran

Abstract

The problems accompanying a large-scale development program are frequently most glaringly reflected in severe balance of payments pressure and in a rapidly rising price level. From such a reflection it is easy to jump to the conclusion that the basic need of the developing countries is simply more foreign exchange and more internal savings. And much of the literature and policy recommendations prepared in the developing countries--and elsewhere--concentrate attention on the problems of increasing domestic capital formation and of increasing the availability of foreign exchange. In light of this emphasis it is instructive to examine the development process in a country where special circumstances have resulted in an unusually high rate of savings and an unusually high rate of foreign exchange earnings. Iran is such a country. Since 1954 when the petroleum and political difficulties were resolved, Iran has received, through oil exports and foreign loans, quantities of foreign exchange greatly in excess of that available to most countries with comparable levels of output. Similarly, the particular arrangements of the sharing of the oil revenues have contributed to a rate of savings well in excess of that expected in a nation with a per capita income of, at most, $150 per year.