The departure of former health minister, Hassan Qazizadeh Hashemi, from President Hassan Rouhani’s administration adds to the questions swirling over government’s finances and payments.
Hashemi’s resignation last week was apparently in protest over spending cuts in the Health Ministry's budget for the next fiscal (March 2019-20).
Why do government agencies and institutions often struggle with a shortage of resources to carry out their work and fail to improve the infrastructures despite country’s rich natural resources and government’s dominant presence in key economic sectors? What should be the top priority for the government when it comes to allocation of public resources?
These questions were propounded by Iranian economist Hamid Azarmand in an editorial for Financial Tribune’s sister publication Donya-e-Eqtesad. Excerpts of the editorial are translated as follows:
Economic indicators suggest infrastructures, public-school education, public health, fundamental research, social security and economic policymaking are of poor quality in Iran.
One can find the state of national resources, including water, forests, clean air and underground resources, very concerning. The government does not seem to have accomplished a great deal in safeguarding and protecting these resources, most of which are on the verge of collapse and erosion.
In Iran’s economy, governments usually make efforts to accomplish tasks that are not the prime responsibilities and missions of a government.
In developed countries, the government’s financial system is based on providing members of the public with “public goods”, namely security, justice, education, health, diplomacy, environmental protection and infrastructures, in return for their tax payment.
Social welfare programs, which are mainly in the form of direct transfer of resources to the people, account for 30% of the government's spending package
[Investopedia defines a public good as an item consumed by society as a whole and not necessarily by an individual. Public goods are financed by tax revenues. All public goods must be consumed without reducing its availability to others and cannot be withheld from people who do not directly pay for them. Economists refer to public goods as “non-rivalrous” and “non-excludable”. Sewer systems, parks and other basic societal entities can all be considered public goods. Law enforcement is also an example of a public good.]
In addition, governments are tasked with the creation of public goods by formulating rules and regulations, and making policies to manage limited underground resources, water and clean air.
Many governments mainly focus on their key missions and do not shoulder the burden of selling gasoline, purchasing and supplying food, distributing foreign currency and running enterprises.
The continuous improvement of public goods and economic infrastructures is because of the undivided attention given by governments to their main responsibilities.
Iranian governments, however, are interested in dividing common resources among citizens. The direct distribution of resources among people instead of investment in the production of quality products usually leads to the short-term popularity of governments.
A large portion of government revenues that should be spent on producing goods for public consumption and improving health and education are directly distributed among people in the form of fuel and cash subsidies, state employment, guaranteed purchase programs and government handouts.
Under the pretext of lending support, Iranian governments extend cheap financial facilities to economic enterprises from the Central Bank of Iran's resources. This is how public resources are used up to compensate the administration's inefficiencies instead of spending it on public goods.
The $45 billion paid as energy subsidies by the Iranian government in 2017 to rank first globally, according to the International Energy Agency data, is only one example of the Iranian government’s misplaced priorities concerning the policy of distributing resources.
The proposed budget bill for the next fiscal year (March 2019-20) bears out this harsh truth. Social welfare programs, which are mainly in the form of direct transfer of resources to the people, account for 30% of the government's spending package.
Most economic experts are suspicious about the efficiency of state-run programs like Guaranteed Purchase of Wheat, job creation schemes and the government’s payments to eliminate the gap between the market and the government’s preferential foreign currency rates.
