Iran is about 10 percent of GrossDomestic Product (GDP) off an economic equilibrium that willreduce unemployment and improve significantly people'swelfare by converting oil wealth into sustainabledevelopment. 1) It is about 10 percent of GDP short in theadditional savings and investment needed to attain growththat will reduce unemployment. 2) Optimal management ofIran's oil to provide the above needed savings andachieve an optimal balance between consumption and savingsthat will sustain the benefits from oil after it isexhausted, requires that it allocate about 10 percent of GDPmore for savings and investment and less to consumption fromits oil wealth. 3) That 10 percent adjustment can come fromthe reform of Iran's inefficient energy subsidy system,which also happens to average about 10 percent of the GDP ayear. These expenditures can be transformed into budgetsurpluses that will provide ample credit to the privatesector to grow. This adjustment -at the core of Iran'smedium and long term fiscal strategy- is a main pillar ofIran's transition to a market economy led by theprivate sector. Hence, the critical importance ofalternative management strategy of oil wealth in providingthe needed additional savings to enable private sectorfinancing and promote the transition to a private sector led economy.
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