Iranian Economists Call For Deep Changes, Warn of Chaos
More than 60 Iranian economists have issued a statement addressing the government saying that the main cause of Iran’s economic crisis is bad governance.
More than 60 Iranian economists have issued a statement addressing the government saying that the main cause of Iran’s economic crisis is bad governance.
The signatories, mostly professors of economics in Iranian universities and many who have held government posts, suggest the government’s “economic surgery” since March has led to “social chaos and worsening economic instability.”
With the new Iran year beginning March 22, President Ebrahim Raisi with the backing of parliament began a plan to phase out state subsidies on food imports that had been costing $9-15 billion a year.
While in part a response to global food inflation sparked partly by the invasion of Ukraine, the move, quickly dubbed “economic surgery,” was officially portrayed as a serious reform of Iran’s state-dominated economy.
‘Quick measure in face of global price crisis’
The economists charged in their statement that the motivation was purely fiscal, easing a shortfall in the government budget, and that real reform required more serious change: “[The move was] a temporary and quick measure for addressing the budget deficit amid sanctions and a global food price crisis. We cannot consider this an economic reform.”
The economists argued that this “economic surgery” would lead to a further fall in the value of the Iranian rial and lead to “repeated economic shocks,” and said the government had not engaged with the public about where the policy would lead.
The economists noted Raisi’s election campaign promises to form an inclusive government, utilize experts to draft economic plans, slash “the 50-percent inflation rate,” and build one million housing units each year.
But the economists argued it would not be possible to fulfil such promises without an early agreement in talks with world powers to revive the 2015 nuclear deal and accession to international transparency and related regulations demanded by the Paris-based inter-state Financial Action Task Force (FATF), which blacklisted Iran in 2020.
Despite various restrictions on non-governmental media, many experts and business figures had warned over “the horrible” results of “inaction” in foreign policy and ill-designed policies, the economists said. Economic shocks and the pausing of nuclear talks in March had fed instability, social chaos, and widespread concern among the people over their livelihoods, creating an “explosive” situation.
They went on to warn that “the country’s situation is extremely fragile,” given the elimination of food subsidies. “People’s patience will run out and will place the government and the regime face-to-face with the people.”
Three recommendations
The signatories made three recommendations.
First, the state should have sufficient oil and non-oil export revenues and foreign currency reserves to ensure secure handling of economic fluctuations.
Second, the government should have clear and effective policies to foster macro-economic stability, with control over inflationary budgets.
Third, the government should ensure low-cost access to global markets for goods and services.
The last recommendation is related to extra costs Iranian government and businesses have to bear to do international transaction, given US sanctions and FATF’s blacklisting.
Low growth
The economists warned that Iran had lost ground economically compared with most other countries since 1980, with average growth of 1.6 precent, whereas growth in China, India, Turkey, Malaysia, the United Arab Emirates, and Pakistan had ranged from 4 to 10 percent.
The economists spoke of vanishing hopes, growing poverty and a widening income gap that have led to vengefulness in society. The resulting disorder exhibited itself in destruction of the environment, systematic corruption, widespread emigration, capital flight and brain drain.
The 61 signatories called for “fundamental change in foreign policy” aimed at peaceful coexistence, cooperation with neighbors, and interaction with the world’s economic powers. They also urged improvement in governance, with respect for law, minimizing corruption, establishing an independent judiciary, dialogue and transparency, and allowing “true economic competition” in society.
In an editorial authored by the daily's outspoken managing editor Masih Mohajeri on June 9, Jomhouri Eslami [Islamic Republic] writing about the Iranian government's economic problems said, "A government that holds up payments to pensioners as a bid to solve its economic problems should prioritize its expenditures and get rid of unnecessary organizations."
The daily asked: "Some of Iran's cultural organizations do nothing other than duplicating the efforts of other government institutions. For instance, what kind of service is the Islamic Propagation Organization rendering that justifies its survival?" The newspaper maintained: "The high-maintenance organization should have attained its initial goals during the past 40 years [of an Islamic government]. If it hasn't, it means that it has not been successful."
The Islamic Propagation Organization is a body that operates in parallel with Ministry of Culture and Islamic Guidance and one of its objectives is offering guidelines to Friday Prayer Imams in cities and towns nationwide.
Over the past four decades, the organization's main function has been justifying the government's policies and trumpeting the ideas of fundamentalists in Iran such as the Friday Prayer Imams in Isfahan and Mashhad. The two clerics are often criticized by the people for undermining human rights and advocating violence against women and those who follow a lifestyle different from the preferences of the fundamentalists.
Last week, a young man in Isfahan attacked Yousef Tabatabainejad, the Imam in Isfahan who had opined that people can attack "bad-hijab" women at their own discretion. In their sermons on Friday June 10, several imams made outlandish statements. Ignoring Iran's economic problems, Rasoul Abdollahi who led the prayers in Tabriz said that Raisi's economic policy is being followed in Russia as an economic model for resistance.
Meanwhile, Mohamad Nabi Mousavi Fard in Ahwaz called for shaming those who undermine “Islamic values in the streets” as a lesson for others, while Ahmad Khatami in Tehran and many others in other cities repeated the official jargon about a resolution passed this week at the UN nuclear watchdog, the IAEA, criticizing Iran's non-cooperative behavior and praised the government for undermining IAEA safeguards.
In another article on Thursday, the Jomhouri Eslami wrote that the government has increased the Islamic Propagation Organization's budget by 156 per cent in for the current year. The article charged that the government of President Ebrahim Raisi has started what he called an "economic surgery" by targeting the poorest Iranians while giving more funds to government bodies such as the Islamic Propagation Organization.
Last year the organization received around $40 million based on the average exchange rate in 2021, there fore this year the appropriation is more than $100 million. Although this might not seem like a large sum by Western standards, in Iran an average person has a salary of $150 per month.
Overall, the government spends close to $800 million on propaganda outfits, not counting the state television with close to 40,000 employees and a $200 million budget plus advertising income.
The article went on to say that such organizations have been a burden on the country's annual budget and national financial resources for years without being able to contribute to productive efforts or the nation's welfare. The daily argued that economic pressures should be distributed fairly among various parts of the government and groups of the population.