“Iran's economy is on the road to collapse”

Inflation, rising unemployment and an irresponsible economic policy seems to be the Ahmadinejad administration's political legacy. The next president will face severe challenges, writes financial journalist, Sara Damavandan, in an analysis of the country's economic situation.

June 10 2013 Text: Sara Damavandan

Iran was chosen as the “most inflated” country of the region for the last year and came sixth place in the world. The wheels of Iran’s economy are not greased well. This is not said only by opponents and critics of the Islamic Republic of Iran’s government. Even those who are working in the core of the regime believe that the country is facing a big economical problem and inflation has shadowed the country more than ever.

Lack of appropriate policy and accurate planning not only has caused business owners to face bankruptcy, but also has endangered the living of ordinary people and has impeded life for the low-income people in society. These days, inflation, unemployment, and unstable prices in the commodity market are the main concerns of Iranian society. These problems have put such a pressure on people that even the Islamic Republic politicians criticize the economic measures and Ahmadinejad’s mismanagement. 

Mahmoud Ahmadinejad whose second presidential term posed many challenges, is one of the Iranian political figures whose presence and lectures have always been so controversial. These days, he has been criticized more than ever. Ali Larijani, chairman of the parliament, is a tough critic of Ahmadinejad. His arguments with Ahmadinejad have been publicized many times, even by the regime-related media.  “We, parliament members, believe that the solution for high prices and unemployment, is development and production growth. Some false claims may be chanted and some people may say something about it, but words do not solve the problem”, Larijani explained about the current economic situation in Iran.

Unemployment, addiction, insufficient earning for living, divorce and lack of suitable housing are just some of the problems that the Iranian society is encountering now. Although the head of the executive power has tried to give hope to people by chanting slogans, he and his teammates have made no fruitful action in this regard. Mohammad Reza Bahonar, Deputy Chairman of the Islamic parliament, knew the major reasons for the current situation in Iran to be a lack of strategic policies, incorrect implementation of the law, absence of popular wisdom, deterioration of some governmental structures and some other reasons. He believes that sanctions against Iran play a minor role in the country’s economic disturbance and we should not blame western countries as the main source of our economic problems. According to Bahonar, the most important reason for high prices and inflation in Ahmadinejad government is liquidity. Unfortunately, liquidity has grown seven fold over the past seven years. Bahonar believes in this principal that ‘liquidity growth must be in accordance with the country’s economic growth. Unfortunately, the country’s economic growth fell to approximately four percent during recent years; meanwhile, liquidity growth has sometimes reached 25 percent. There is a huge difference between these two parameters’.

All people, whether those who have knowledge of economy and politics or the ordinary people who are endeavoring to live their life, believe that “economic progress is a requisite for survival and flourishing of a social and political system”. Economic growth is assessed with different factors based on the existing criteria, growth of production per capita, unemployment rate, inflation rate, income distribution among people, the average education level of workforces, access to educational and health services, life expectancy, rate of cultural productions, retirement and unemployment … are the economic growth indices which are ignored in Iran.

According to the report published by the Transparency International, Iran comes 33rd place among 176 countries. The embezzlement of 3 000 billion Tomans caused consternation and public shock and questioned Iran’s economic health. Some governmental managers such as the former road and transportation minister, the deputy minister of industry, the former deputy of the Central Bank, the former deputy of minister of economy, the former minister of industry, the former deputy of transportation minister and some parliament members played a role in the embezzlement. This has been the biggest embezzlement in Iran’s history. It was highly reflected in the domestic and foreign media and caused confrontations between two different conservative wings in Iran. Release of the news and people’s reaction was in such a way that it questioned all the Islamic Republic regime's officials. Finally, the supreme leader, Ayatollah Ali Khamene’i personally asked the officials and journalists not to provoke and promote this issue.

Doubtlessly, only a country with proper legal and judicial ground can experience economic growth. Economic growth requires a judicial power which can resolve all legal disagreements in the economic area accurately and in a short time. Does this ground exist in current Iranian society? Apart from economic corruption, inflation is another problem that the Iranian society is facing today. Iran was recognized as the “most inflated” country of the region in the last year and ranked sixth in the world. In an official report, Iran Statistical Center announced the average urban inflation, as 31.5 percent in the year 2012 Point to point inflation rate in 2012 was 40.6 percent, comparing to 2011. According to this report, the change in the prices of “foods, beverages and tobacco” within the twelve months before March 2013 was 47 percent, compared to the same period in 2011.

Although Iran Statistical Center announced the changes in the prices of commodities in its new report, unfortunately, it avoided to announce the price indices calculated based on the 2002 base year. Mahmoud Bahmani, Central Bank of Iran Governor, pointed out that inflation rate in January 2013 was 28.7 percent. “Accordingly, inflation rate is expected to be 29.8 percent and 30.6 to 31.5 percent in February 2013 and in March 2013”, Bahmani said. He enumerated the reasons for inflation rate above 30 percent as growth of monetary base, low interest rates, sanctions and liquidity, and other economic variables such as fluctuations in currency markets.

According to the Central Bank of Iran Governor, Iran’s economic atmosphere has undergone uncertainty; unjustifiable risks during the last two years and inflation expectations have been a natural consequence of that. Inflation, unstable prices, unemployment, insufficient earning for living, divorce, addiction, violence, these are all the issues threatening Iran’s current society.

The Iranian presidential election is on the way. We should wait to see if the next president can square away problems or if he, like all the previous ones, will step into the political arena chanting popular slogans and will leave society with a mountain of problems.