Entangled In Financial Crisis Iran Unable To Finalize New Budget
Iran’s economic situation is already alarming with its currency at historic lows and high inflation, but reports suggest next fiscal year will be even more cataclysmic.
Iran’s economic situation is already alarming with its currency at historic lows and high inflation, but reports suggest next fiscal year will be even more cataclysmic.
While the US dollar was trading for over 410,000 rial threshold on Thursday, President Ebrahim Raisi’s administration has not finalized the country's budget for the next Iranian year starting March 21, and the fate of the country’s Seventh Five-year National Development Plan (2022-2026) is still in limbo.
Following weeks of buck passing between the administration and the parliament, in which lawmakers insisted that without a final new five-year plan the budget cannot be considered, the government is still dragging its feet. Some hardliner supporters of President Ebrahim Raisi argued Tuesday that both plans may be discussed simultaneously at the parliament, but Speaker Mohammad Bagher Ghalibaf opposes any change of procedures.
The law says that when a five-year plan comes to an end, the government should submit a new one, based on which the legislature can debate a new budget. But amid lack of economic and financial clarity due to sanctions and international isolation, the government has not finalized the next five-year plan, while the deadline to submit a budget passed in December 6.
Since 1989, the Islamic Republic has been devising five-year development plans. A lot of organizations and institutions are involved in designing and actualizing these plans, which mostly remain on paper, because they are full of general statements without planning for the needed monetary resources.
According to parliament rules, if the administration misses the December 6 budget deadline, it must attach an addendum to the budget bill that will earmark spending for quarterly portions of the year. This means demanding extra work from an administration that has already failed to perform its ordinary procedural duty. Quarterly allocations mean parliament will approve only three-month budgets, which will tremendously complicate operations not just for government departments, but all the businesses owned or controlled by the state, which constitute up to 80 percent of the economy.
Considering the steep fall of the rial and growing sanctions pressure, the administration cannot have a reasonable estimate of the dollar exchange rate and the amount of revenues from oil exports for the coming year to be able to finalize the details of the budget. On the other hand, the government is selling oil under the market price to small Chinese refineries and through illegal ship-to-ship transfers to circumvent sanctions. Now that Russia is also competing with Iran in sales to China, the government is not certain how much crude Tehran would be able to sell and at what price.
In July, the Supreme Accounting Office released a report covering the period March 21- May 20 showing that except tax revenues, all other major sources of income grossly underperformed, which local media said was a serious warning for the government and the economy. The government’s revenues from taxes, oil exports, customs duties, etc. totaled 880 trillion rials or about $3.5 billion (average free market exchange rate at the time) in the 60-day period. This was just 37 percent of the projected budget revenues. It is important to note that only 15 percent of the projected oil income was collected.
All this chaos is happening on the backdrop of over 115 days of antigovernment protests, that have accelerated capital flight. Confirming the massive outflow of capital from the country, head of Tehran Chamber of Commerce, Industries, Mines and Agriculture, Masoud Khansari, said earlier in the month that the annual outflow of capital has reached about $10 billion.
Opponents of the Islamic Republic have also urged people to withdraw their deposits from government banks to put further pressure on the government, which has been printing more money in recent years. The money supply has grown at an unprecedented pace since September.
Banks have raised interest rates to attract deposits. In the past few days the Central Bank has given the go-ahead for up to 20-percent interest rates for banks to pay. Although the Central Bank says any rate more than 20 is a violation of the law and can lead to the firing of a bank manager, a many banks – especially semi-private institutions are giving 23 to 25 percent interest under the table.
Talks to revive the JCPOA and lift most of the US sanctions have stalled since September when the last attempt by the European Union to broker a deal fell apart.
In a video message he released on social media Wednesday, Peyman Jebelli said he had seen his brother’s interview, adding that such incidents were not unprecedented.
The chief of the IRIB, the key state propaganda machine, also tried to raise suspicion over his brother’s remarks in the interview suggesting that Meysam (Maysam) may have been under some kind of pressure, purportedly by a foreign government or group. “I’m not sure he made these comments knowingly and of his own volition.”
The interview followed the Time’s disclosure Tuesday that one of the IRIB chief’s brothers, Meysam had defected in early 2020 along with another brother, Meghdad, and that they had sought asylum after their nephew Mohammad-Amin’s tragic death in IRGC's downing of a Ukrainian airliner on January 8, 2020.
The report and subsequent information did not indicate where the brothers asked for asylum. The United States and Canada are the two most likely countries.
The IRGC fired two missiles at Flight PS752 only minutes after it took off from Tehran’s Imam Khomeini Airport amid heightened tensions between Iran and the United States after firing dozens of ballistic missiles at a US military base in Iraq in retaliation of the targeted killing of Qods force commander Qassem Soleimani.
Supreme Leader Ali Khamenei appointed Peyman Jebelli, a close associate of his son Mojtaba, as the head of the IRIB, in September 2021. Jebelli was designated by the United States in November and by Canada in October for his role in the regimes violations of human rights including airing of confessions extracted under torture.
Jebelli’s nephew, the 29-year-old Mohammad-Amin who was among the 176 passengers of the flight, had been pursuing a Master of Health Science at the University of Toronto since 2018. Not only his uncle but his own father, Mohammad Jebelli, also chose to take the regime’s side over the incident.
The tragic death, however, did not shake the loyalty of Mohammad-Amin’s father and his uncle, Peyman Jebelli, to the regime and they chose to remain silent about the IRGC’s responsibility in the incident, Meysam told Iran International. “He stepped in his own son’s blood,” Meysam says.
When Meysam tried to convince his brother Peyman that the plane had been struck by missiles as video footage that emerged on social media indicated, the IRIB chief denied the authenticity of the footage and claimed it showed Israeli air defense exercises.
When the truth came out three days later and Meysam confronted him again, the IRIB chief only said “Good for you that you realized that [before its public announcement]!”
Meysam says he was not pro-regime like his other brothers but after the downing of the plane, which he calls “murder by the Islamic Republic”, he decided to openly denounce the regime. “It was time to take sides.”
In a tweet after Meysam’s disclosure of his and his brothers’ disputes over the incident, Canada-based activist Hamed Esmaeilion, whose daughter and wife were killed in the crash, revealed that the two Jebelli brothers who have defected have been members of an association seeking justice for the victims of Flight PS752 for a long while.
“What matters about the Jebelli brothers, Meysam and Meghdad, … is not defection but their choosing the right side of the history. They did not remain silent,” Esmaeilion wrote.
Reformist newspaper Shargh wrote in a January 10 article that Expediency Council members have also become critical of the Raisi administration's inability to prepare the country's annual budget bill and the related 5-year development plan, as well as rising inflation and the devaluation of Iran's national currency.
Shargh further asked whether the conservatives are going to lose their patience in the face of the government's indecision and inaction while the country's worst economic crisis continues with an ever-increasing momentum.
At the same time, “poverty has been spreading” to large parts of the Iranian society while the government has not introduced any plan to support the low-income strata and prevent further shrinking of Iran's middle class, the daily wrote.
Conservative economist and a member of the Expediency Council Ahmad Tavakoli has recently warned the Raisi administration and Iran's conservative-dominated parliament: You may not be too far from the day when the poor pour into the streets and put an end to the current situation." He further warned: "Please do not do something that might lead to a revolt by the poor."
Tavakoli also criticized members of Iran's parliament for approving or rejecting economic issues including the bill about capital gains tax without having read at least two pages about the matter.
Meanwhile, another member of the Expediency Council, Gholamreza Mesbahi Moghaddam, who is also a member of the right-wing Militant Clerics Association, said in an interview with Khabar Online: "The structural problem of Iran's economy is that we do not produce wealth. We simply distribute the resources. People see the situation in other countries…about better living standards."
Mesbahi added: "Iranians need to spend more money than they earn and the Iranian government's expenses are more than its revenues. As a result, both Iranian families and the Iranian government have to constantly borrow money to make ends meet."
He said, "Unfortunately the Iranian government lacks a strategic vision and does not have the right people to pursue a strategy. Raisi used to say during the 2021 presidential election that he has a 7000-page economic plan on his desk. I asked him to show me the plan, but he did not have anything. I offered him some suggestions, but he insisted on his opposition to the FATF saying that it will give the United States more pretext for sanctioning Iran."
The Financial Action Task Force, an inter-state watchdog has blacklisted Iran’s banking for lack of adherence to anti-terror financing rules and money laundering.
Mesbahi also criticized the government for not having a long-term plan and thus furthering its business on a day-to-day basis.
In yet another development, hardliner Students of Amir Kabir University in Tehran harshly criticized Raisi's justification for rising prices in Iran. They told him they expect him to have an effective hand to do things rather than a tongue to justify everything by words.
Hardliner cleric Naser Makarem Shirazi also criticized Raisi's economic policies. He said: "It is regrettable that the officials not only do not solve economic problems such as rial’s steep fall, but they tend to totally ignore the problem."
Meanwhile, conservative commentator Naser Imani has said recently: "Government officials have still not realized the country's situation and therefore, they cannot offer any solution for the problems. Their best defense often is to say that there is nothing wrong with their performance and it is the enemy who creates all the problems." However, Imani shied away from saying that two of those who always attribute Iran's problems to foreigners' conspiracies are Supreme Leader Ali Khamenei and President Ebrahim Raisi.
“I hail the women whose hijab [compliance] is weak but are loyal to the Islamic Revolution,” former parliament speaker Gholam-Ali Haddad-Adel said in a program aired by the state television Monday.
Haddad-Adel who is father-in-law to Khamenei’s son, Mojtaba, also insisted that the issue of the hijab should be “taken seriously” but not in a manner that it “polarizes” the society.
Haddad-Adel’s remarks came a few days after Supreme Leader Ali Khamenei coined a new term, ‘feeble-hijabed’ in a speech last week to refer to women who wear the hijab but not strictly enough to be completely satisfactory. The speech was delivered to a hall filled with black veiled women.
Women in a Tehran shopping mall with scant hijab or no veil after the protests
But in fact, the protests have created a new reality that the regime has a hard time to counter. Many women appear without hijab in big cities taking heart from the protest movement. If the government uses force to stop them, it would enflame more opposition.
In the past four months many women from various walks of life, students and housewives to celebrities, have flouted the hijab rules. Actress Taraneh Alidousti, for instance, was arrested for posing on Instagram without a hijab on December 17 but as soon as she set foot outside the prison on bail last week, she again dropped her headscarf defiantly.
Without any proof, Khamenei claimed that women whose approach to wearing the hijab is laid-back had “slapped the mouths of those who advertised calls to protests”. This contradicts the earlier hysterical reaction of Khamenei’s hardliner supporters to women appearing without a veil in public. In fact, many on social media commented that disobeying the hijab requirement was a slap in the face of the regime that spent decades trying to enforce it.
Abiding by hijab rules is the inevitable duty for all Muslim women, he stressed but also said that women should not be labeled as non-religious or anti-revolutionary if they failed to fully honor the hijab requirements.
The veil should be worn in a manner that very little from the face remains visible with clothing that totally covers and obscures the shape of the body and legs. Women should also avoid wearing bright colors.
However, one of the women chosen to speak in the meeting with Khamenei last week uncharacteristically wore a red headscarf and a tunic over a checkered shirt. She also appeared to be wearing some make-up and lipstick.
The speaker’s outfit, which somehow resembled the Lebanese style of hijab, probably demonstrated the level of ‘tolerance’ to be shown by Khamenei when it came to forms of hijab other than the black veil.
Taking his cue from Khamenei, Parliament Speaker Mohammad Bagher Ghalibaf (Qalibaf) criticized the police over their harsh treatment of women with loose hijab the next day. "What right do we have to say that we won't let women use the subway if they are not wearing their hijab properly?" he asked.
Given their very aggressive approach to women’s defiance of hijab rules, religious hardliners will be finding the attempt to appease parts of the society very difficult even if Khamenei appears to be behind the move. “Some piety-minded people were not pleased with the Leader’s recent remarks about the hijab,” the Hamshahri newspaper wrote Saturday.
In fact, there all all sorts of contradictory statements by officials. On Tuesday, the hardliner Judiciary appeared to demand stricter hijab enforcement. Whether the contradiction are a part of a cynical policy or the result of genuine disagreements among the top echelons of the regime, is not clear.
Before the 1979 revolution very few imagined that the future government of Iran would be an Islamic Republic run by clerics or that all women would have to wear the hijab, which some women wore by choice back then.
Elias Hazrati, who is also the proprietor of the newspaper explained that restrictions imposed by the government have made it impossible for the editors to do their job according to the daily's editorial standards.
Hazrati said in the editorial that readers had complained why the paper did not carry a report on the anniversary of the Ukrainian plane, shot down by the Revolutionary Guard on January 8, 2020, as it took off from Tehran.
He stated that "in fact, Etemad's editors had prepared several reports on the topic with added value by its analysts. But Etemad's editorial standards were not compatible with the closed circle some policymakers and state institutions have drawn around the media to restrict their activities."
"When we found out how limited the scope of our articles should be, we decided not to publish the story at all," wrote Hazrati. However, his statement revealed that at least sensitive articles are read and censored by individuals other than the daily's editors before publication. He also spoke about directives that were issued by "some institutions" to censor the media.
The statement by Hazrati, which came in an editorial entitled "A transparent report to our readers" in the January 9 issue of Etemad, was made a week after security forces stormed the home of the daily's political editor Medi Beik's and arrested him after confiscating his cell phone, computer and other equipment.
When Beik's wife broke the news about his arrest, his colleagues in the newspaper expressed support for him in social media comments. On January 7 several columnists as well as Hazrati himself expressed support for Beik on the frontpage of the newspaper, pointing out that he should not be jailed for doing his job.
Beik became very well-known for publishing a series of reports about young protesters in prison. In one particular case, Amir Hossein Rahimi, a 15 year-old jailed protesters with shotgun pellets in his head and neck whose mother did not have the bail money to secure his release, was finally freed thanks to an article in Etemad about the case. The shotgun pellets were subsequently taken out in a Tehran hospital.
Hazrati’s reference to "institutions" refers to the IRGC and the intelligence ministry in the Iranian political jargon. Although IRGC's aerospace commander Amir Ali Hajizadeh has admitted that it was an IRGC battery that fired two missiles on the Ukrainian aircraft, still, discussing the matter is some sort of taboo for the press. Even the Iranian Judiciary has not been able to convince the families of the victims why due judicial process has not been observed to determine the main culprits.
Hazrati said: "We trust that our policy is quite clear. We believe that well-documented reports by Etemad and other media outlets can pave the way for the people's trust in the government." He pointed out that the arguments about the downing of the aircraft and secrecy around the case has eroded this trust. However, he noted that perhaps the authorities do not want any coverage of the matter while a court is investigating the case.
"But we believe that free media are part of responsible governance. Democratic countries welcome transparent news dissemination. And experts and the family members of the victims have a right to speak about the case outside the court," he said.
The story has been controversial from the start as Iranian officials denied any attack on the aircraft for three days before admitting that it was hit by two missiles. Still, no one wants to accept any responsibility.