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Iran’s economy on edge of abyss; cutting off ties with world is paralyzing the economy

Tuesday, 11 June 2013

Shargh newspaper interviews with economic experts on what will happen to the Iranian economy if conservatives again win the elections: Iran’s main issue these days is undoubtedly the economy. Citizens expected the elections would focus on the economic debate with heated discussions among the candidates surrounding the ways to restrain inflation and the amount of cash in the market, job creation, etc. This, however, did not happen and the discussions were again diverted to political issues. Five of the eight candidates are from the conservative camp, which has, during these years, completely supported Ahmadinejad and his government, and are therefore responsible (for the harsh economic situation) according to the public as a result of this support. Citizens expected that the conservative candidates would introduce a formulated plan to resolve the economic situation, but this did not happen either, and they spoke around their plans without providing clear explanations about real solutions. In the days remaining before the elections, the economic platform of the conservative candidates does not appear to be very different from that of the current government, and they will again focus on expansive monetary policies and distribution of poverty instead of distribution of wealth. The question is where this process will lead the country. What future will a conservative government whose behavior will not differ from that of the Ahmadinejad government be? Shargh offers a message from the experts:

  • Lifting of sanctions is key to stopping chaos – Minister of Industry and Mines Eshaq Jahangiri believes that new inflation is a specter lurking over the family economy. In the past year, the country’s economic development, and subsequently that of the economy of families, faced dangers from several fronts. Following implementation of the Subsidy Reform Law, the government had a huge public debt. To pay this debt, the government was forced to turn to the Central Bank. Payment of cash subsidies to citizens foreign to the market, a large amount of cash, alongside stagnation in manufacturing and barriers to importing merchandise due to sanctions as well as foreign currency problems and banking restrictions on Iran around the world (disconnection from the SWIFT system), resulting in a dramatic rise in inflation. The sanctions also resulted in a sharp decline in Iran’s oil revenue, budget deficit, etc. These problems reveal that Iran’s economy is on the edge of an abyss, and there is no doubt that a continuation of this process will result in a further increase of inflation in the country. A quick look at this government’s performance and the state of the economy indicates that we can undoubtedly expect inflation to rise in the coming year. The four main challenges the new government will face are: budget deficit, limited and restricted manufacturing, trade restrictions and an unprecedented rise in the amount of money. One of the (next) government’s major moves must be to lift the barriers on manufacturing, which will unquestionably get the economic wheels turning. In addition, Iran’s foreign policy, which has a major impact on its economy, must be reconsidered. Cutting off ties with the world, which is increasing every day, is paralyzing Iran’s economy. The government must act to lift some of the unilateral sanctions, something that will only happen through a serious political move.
  • Candidates statements trigger despair; not one presented actual solution Former Deputy Oil Minister for International Affairs, Mehdi Hosseini, believes that anyone defending the current economic situation and who believes that the situation is natural must understand that a continuation of this process will make Iran’s position extremely regrettable. If two years ago, we would have said that one day the dollar would reach IRR 40000, we would have laughed, but today, we are no longer laughing, even when they tell us that the dollar may reach IRR 60000. The statements made by the candidates are triggering despair. Not one has presented an actual solution or mechanism worthy of further examination. Iran’s economy is in critical condition, and surprisingly, there are those who are expressing support and defending this situation. One must ask, what are these gentlemen waiting for? To what point must the Iranian economy and international relations deteriorate for them to understand that there is a problem? Unemployment in Iran is at a crisis level. In light of the number of academicians every year, two million jobs per year must be created. The candidates must clearly say how they plan on accomplishing this. The creation of jobs will occur when there is capital investment in Iran. We must lead the country to a position in which we can raise foreign capital. No country can expect development and progress to occur solely using national revenue. Iran’s current situation can be attributed to two main factors, sanctions and failed management, whose negative impact is no less than that inflicted by the sanctions.
  • Political decisions have a decisive impact on the economy – Economic affairs expert Mohammad Maraj Hosseini believes that government performance in the political and economic arenas will undoubtedly have an impact over the next four years. Even if the policies change, we cannot hope to improve the situation in the short term. Government money over the past several years was earmarked to provide citizens with an ‘allowance’ instead of being used to generate more money and increase revenue. Not only did the granting of cash subsidies not help families, it triggered inflationary effects. The next government must change the method of payment of the subsidies and act to channel revenue from subsidy reform to manufacturing in order to increase capital investment and to create jobs. Political decisions have a decisive effect on Iran’s economy. As such, the next government must move to change its foreign diplomacy. Iran’s forced isolation this past year has blocked access to raw materials needed for manufacturing, while the restrictions on money transfers has caused a drop in investments. The next government must make reconciliation with the world a top priority. The next president must know that a relationship with several African countries and several individual countries in South America will not solve Iran’s economic woes. If the next government decides not to change its foreign policy, we must expect more difficulties in the coming years. Manufacturing will be critically harmed, economic growth will continue to decline, and citizens’ purchasing power will further be harmed.


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  • Published: 2 years ago on Tuesday, 11 June 2013
  • By: Iran Daily Brief
  • Last Modified: June 11, 2013 @ 3:10 pm
  • Filed Under: Economy
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  • Source(s):
    • http://sharghdaily.ir/?News_Id=12349

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