NICOSIA, Cyprus (AP) _ Iran's president, Hashemi Rafsanjani, on Wednesday denied that Iran engages in terrorism and is stockpiling arms.

''Although the Iranian people have been a victim of terrorism more often than other countries, certain people in the world still accuse the Islamic Republic of terrorism,'' Rafsanjani was quoted as saying.

The Islamic Republic News Agency, monitored in Cyprus, said he told foreign diplomats and representatives of international organizations that critics have not been able to prove Iran has purged dissident groups outside Iran.

The Baghdad-based Mujahedeen Khalq, the leading Iranian dissident group, has blamed the Islamic government for kidnappings, torture and killings of dissidents abroad.

Rafsanjani also disputed claims that Iran has spent $7 billion the past few years on fighter-bombers, tanks and other advanced weapons purchased mainly from eastern Europe, China and North Korea.

He said the government spent 1.5 percent of its gross national product on defense, and that weapons were bought to replace those lost during the 1980-88 Iran-Iraq war.

If Rafsanjani's claim of 1.5 percent were accurate, that would work out to about $500 million. Defense Minister Akbar Torkan said Iran would spend $750 million this year on weapons, the Financial Times of London reported Monday.

Some sources have claimed Tehran was spending $2 billion a year.