By Parisa Hafezi

ANKARA (Reuters) - Iran's supreme leader criticized the country's slow pace of economic recovery on Thursday despite the lifting of sanctions and called on President Hassan Rouhani's government to champion greater self-sufficiency, state TV reported.

Ayatollah Ali Khamenei's criticism comes ahead of Iran's presidential election in May, when the pragmatist president is expected to seek re-election.

"Of course the government has taken remarkable steps but if the resistance economy had been implemented fully and widely, we could witness a tangible difference in people's lives," state TV reported Khamenei as saying.

The "resistance economy" promoted by Khamenei is aimed at making Iran' economy more self-sufficient.

Rouhani's popularity and his efforts to end Iran's economic and political isolation have panicked hardline allies of Khamenei, who fear losing power and aim to reclaim the presidency for their faction.

Most sanctions imposed on Iran over its disputed nuclear program were lifted in 2016, in exchange for Iran curbing its nuclear work under a deal with six major powers in 2015.

Khamenei and his allies have criticized Rouhani's government for failure to bolster the economy since the sanctions imposed on Iran were lifted a year ago.

"We receive complaints from people ... People should feel improvements regarding creation of jobs and manufacturing. It is not the case now," he said.

Rouhani and his ministers have defended the government's record, citing economic reports and figures pointing to improvements.

"Presenting reports and figures is good but will not impact people's lives in mid and long-term," Khamenei said.

Hit hard by the double hammer blows of years of embargo and the plunge in oil prices since the middle of 2014, Iran's economy has slowly recovered since the lifting of sanctions but deals with Western investors are few and far between.

Foreign investors are cautious about trading with or investing in Iran, fearing penalties from remaining unilateral U.S. sanctions and U.S. President Donald Trump's tough approach to the Islamic Republic.

"Attracting foreign investment is a positive measure but so far a very limited of foreign contracts have been materialized," Khamenei said. Iran needs foreign capital to modernize its key oil and gas sectors.

(Writing by Parisa Hafezi; Editing by Dominic Evans)