• Domestic Economy

    The Breeze of an Agreement

    In the current fiscal year [started March 21], positive and promising news about Iran's nuclear program or the resolution of regional tensions had a tangible impact on economic indicators. 

    This is while some claimed that high prices inside the country or inflation had nothing to do with sanctions and only pertained to mismanagement; sometimes they said 20% of the problems are caused by the sanctions and 80% by internal issues. 

    At least in the last two years, it has been proven that the removal of sanctions and regional tensions could effectively lower prices, Hadi Haqshenas, an economist, wrote for Arman-e Melli. A translation of his article follows:

    No expert could agree that the price of the US dollar is worth 60,000 tomans, but before the normalization of relations between Iran and Saudi Arabia, the price of the dollar went up to that level, and it was predicted that it would increase even further. But the first positive shock that reduced the currency rate was lent by the resolution of the Iranian-Saudi conflict. 

    Secondly, news of a provisional deal on Iran Nuclear Agreement had an impact on indicators such as gold coins and foreign currency rates, as well as cars. Of course, some approvals were finalized from the free zones for the import of secondhand cars, and the recent approval of the parliament was also effective.

    But the important thing is that these have not yet been finalized. What has been finalized though is the release of a part of Iran's frozen money which was paid for Iran to repay its debt to Turkmenistan, and a part of the Haj trip to Saudi Arabia was paid out of Iraq’s debt to Iran. 

    More investigation and time are needed to determine the sale of 1 million barrels of oil and the lifting of some restrictions on the one hand and the restriction on some Iranian activities on the other hand. However, if these agreements are finalized, the reduction of prices can continue.

    But we should not forget one point, that it will take time for Iran's economy to normalize. Then there is the issue of productivity and efficiency of the management of economic enterprises, as well as the most important issue of investment in Iran's economy. As long as the investment growth rate is equal to or lower than the depreciation rate, no one expects Iran's economy to be productive and register high growth, for which we need to attract domestic and foreign capital. The fact that some officials of the Oil Ministry have said that in the next five-year development plan, about $200 billion are needed for investors, at least in the oil, gas and petrochemical industries, it will happen under normal circumstances, and most importantly, it will take time. Therefore, for the time being, it can be said that a breeze has blown to relieve some of the tensions and lift the sanctions, even temporarily.

    Therefore, it is natural that this cannot be the full picture of Iran's economy. In order for the country's economy to return to normal conditions, we must wait for the sanctions to be lifted completely, because under temporary conditions, investors are hesitant to invest because any of those sanctions may return. 

    At the same time, any kind of agreement or understanding can be promising, at least in the current situation of high inflation, high unemployment rate and low economic growth rate, as well as housing, water, soil and all kinds of crises that we are dealing with today. There should be a pause, but we still need a fundamental solution.

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