A hundred-day review might not be an accurate reflection of the economic performance of governments, but it gives you sufficient insight into their competence in fulfilling the campaign pledges made to the electorate, reads an article written by housing expert and economic analyst, Gholamreza Salami, for the Persian daily Donya-e-Eqtesad on President Ebrahim Raeisi’s economic record during his first 100 days. A translation follows:
The criteria needed for assessing this competence, in the absence of an efficient party system, lie in the response to the following questions:
1. Does the government have a written economic strategy?
2. Have capable people been selected for key positions in the government’s economic institutions?
3. Is there any similarity between the selected people? What about coordination and synergy among them?
4. Does the government have integrated, practical solutions to pull the country out of the current situation?
5. Have each of the economic organizations provided acceptable solutions, within their purview, to help solve the country’s economic problems?
6. Are there any tangible, positive changes in the government’s approach compared with past misguided economic policies?
7. And finally, are there any signs of improvement in international and domestic relations?
Q1
Regarding the first question, the Raeisi government, like the previous Iranian governments, has yet to present an economic theory for the country. The countless strikes inflicted on a wealthy country like Iran at the beginning of the Islamic Revolution withy the introduction of concepts such as “monotheistic economy” and “monotheistic classless society” are not hidden to people who lived in those years.
There are signs of the return of that ambiance by young officials holding key positions and who seek to make a name for themselves in today’s economy.
Far-left groups, who have always taken advantage of such ambiguities in favor of their own ideas, seem to have regained their strength, imparting their old threadbare solutions in a new, attractive packaging to the government and the revolutionary parliament.
Such an environment won’t provide the necessary conditions for the president to work well even if he intends to put forward his economic strategy for the next four years. Furthermore, you can’t expect to see the development of an economic strategy in the absence of an efficient party system.
Q2 & 3
On questions two and three, again it seems that most appointees for economic positions suffer from a lack of needed knowledge and competence to lead the country out of the current stagnation.
More importantly, you cannot see coordination and synergy within the government’s economic team. Perhaps, members of the government economic team’s only shared opinion is their opposition with economic plans of previous reformist governments and overoptimism about their own abilities.
Q4 & 5
Regarding the fourth and fifth questions, regrettably, over the first 100 days, the new government has failed to present a practical solution for fundamental economic issues.
We’ve witnessed the fact that in the past several decades, government officials have repeatedly mistaken cause for effect. Three branches of the government: legislative, executive and judicial, still believe that inflation and price gouging are synonymous.
To counter the roots of price gouging, they employ punitive, security measures and adopt a price control policy.
You may feel a sparkle of hope when you hear the new president talking about countering inflation by harnessing money supply and pledging not to borrow from the central bank for addressing his government’s budget deficit. But hopes fade away when he falls shy of introducing another solution to tackle the multibillion-dollar deficit in the current year’s budget.
The claim that the government has not borrowed a penny from the central bank in recent months, without revealing the sources from which the budget deficit has been financed, raises suspicions that the government is employing non-transparent measures to influence public opinion. Following scenarios come to mind: The country’s frozen assets have been released or the Central Bank of Iran has purchased bonds of commercial banks and other banks from the government and using these resources, the bank has purchased new bonds and put them at the government’s disposal.
The so-called “solutions” of retaining the ban on car imports and allowing local carmakers to assume total control over pricing in order to keep afloat, allowing banks to increase their commissions and slash the fixed deposit interest rate against inflation or engaging in speculative operations with people’s money to stay solvent are in actuality “counter-solutions”.
Slogans like Iran’s agriculture has the capacity to feed 700 million people [made by one parliamentarian], or that we can make Iranian youth rich by giving them permits to establish a company once they get married, or giving years-long tax exemption for companies lacking an initial investment, or allowing the repurposing of agricultural lands (converting them to residential and commercial areas), or talking about the construction of one million housing units per year, providing dwellings for millions of people who don’t have access to adequate housing without providing a pragmatic solution on how to finance these costs, or speaking of elevating Iran’s economic global ranking to third in 15 years won’t take the country anywhere.
The new government’s hope of the stock market salvaging Iran’s economy (just like what the previous administration hoped for) gives you sufficient reason to become disappointed about the government’s economic success. Former president, Hassan Rouhani, had come to believe that the stock market per se was an institution capable of generating wealth and added value, thanks to the misinformation he received from illiterate or maybe literate advisors with hidden motives. The parliament and government were all engulfed in this atmosphere; opportunists pumped millions of dollars into their own pockets by creating rent for some companies (from people’s money), which economic disaster was unheard of in Iran’s contemporary history.
These stakeholders won’t let go of their poisonous theories easily. They seem to have persuaded the parliament and the new government that the only way out of the current economic crisis is by giving full support to the stock market, regardless of what is going on in the real sector of the economy.
Over his first hundred days in office, the president and his team’s efforts have been concentrated on finding a solution to save the stock market from the current situation and returning it to the golden days of the early 2020-21; not a day has passed without promises on the prospects of the stock market improving.
Based on this single criterion, you can judge the knowledge of some economic policymakers in the government. Economics graduates who do not know that stock markets, all over the world, reflect real economies and that with recession and lack of productivity in the real economy, profit-making from the stock market is only possible with an increase in inflationary expectations and depreciation of local currency (and not for every member of the society but just for those engaged in rent-seeking practices) are likely to make irreversible mistakes.
Q6 & 7
On question number six, I must say that misguided economic policies include manipulation and suppression of foreign exchange rates and interest rates despite the chronic double-digit inflation, sticking to the policy of replacing imports [with local production] rather than expanding exports, overreliance on oil revenues even for meeting current needs, anti-foreign investment policies, not attracting foreign managers, technology and markets, placing countless hurdles in the way of economic liberalization and deregulation of the prices of energy and essential goods, resorting to quasi-privatization instead of real privatization, creating and strengthening monopolies, tightening the noose around the private sector and making them constantly weaker than before and, worst of all, calling this confused system “a free, liberal economy” and putting all the blame on it.
The new government has yet to put forward a pragmatic proposal based on economic theory for increasing production and exports, and decreasing inflation and unemployment by preparing the ground for the attraction of foreign and domestic investments.
Setting the stage for attracting new investments depends on the answer to the last question, but sadly, there is no evidence or sign of exit from the current stagnation or creation of a secure investment environment in the country.
