Discriminatory austerity measures targeting the salaries of public servants would be a dangerous move, Hossein Haqgou, an economic analyst, wrote for the Persian daily Ta’adol. A translation of his article follows:
The salaries of employees will increase by 10% next year [March 2022-23] to control inflation and help lower the prices of essential goods, a deputy speaker of Iranian parliament [Ali Nikzad] said on Sunday.
The head of Plan and Budget Organization [Masoud Mir-Kazemi] has also recently said that next year’s budget will be finalized without a deficit, as budget deficit is the root cause of the country’s numerous problems.
One of the ways or perhaps the main way [of tackling budget deficit] is to keep pay rises at low levels (here 10%). This is a break with tradition; the increase in salaries set for the current year has been almost equivalent to the inflation rate.
The PBO chief added that “when salaries rise by 20% without the resources, in actuality, by creating money, [the government] has reached into the pockets of the less-privileged members of the society. They have to pay for this decision, which means that their wages have increased but, in return, due to inflation another 3 million [tomans: 30 million rials] have been picked from their pockets. The incumbent government [led by President Ebrahim Raeisi] will increase people’s purchasing power by creating stability, economic growth and decline in inflation”.
Calculations show the government spends 500 trillion rials [$1.72 billion] per month and 6,000 trillion rials [$20 billion] per year on remunerations. A part of this significant sum, i.e., 1,300 trillion rials [$4.48 billion], are government’s financial assistance to civil and armed forces pension funds and their members. These payments devour 70% of the budget. Therefore, any decline in these figures would help decrease the budget deficit and the government’s expenses.
But how is it possible to convince millions of employees and pensioners to accept a pay rise of as little as 10% and urge them to hope for a decrease in inflation in the future? That’s not an easy task, unless this austerity measure is implemented within a larger package to win over people’s cooperation and support.
This package must include improvement in relations with the world and removal of sanctions, i.e., a bright future for the country’s policies. Budgetary resources allocated to special institutions, tax exemptions (direct or indirect) granted to agencies and institutions should be eliminated and the spending and transfer of resources to semi-private enterprises and public institutions must decline, banks’ balance sheet should undergo reform and a competitive environment should be created to involve the private sector.
The fact of the matter is that in the absence of such a policy package, which is beyond notes and articles of annual budgeting and originates from a change in the attitude toward the economy and the implementation of structural reforms within an economic plan, there is nothing but great tension in the society and of course a deeper recession.
Even members of the Cabinet will not comply with the move, such that economy minister [Ehsan Khandouzi] has recently corresponded with the head of Administrative and Recruitment Organization [Meysam Latifi] and called for increasing the salaries of his employees.
Anyhow, taking such a discriminatory austerity measure would be a dangerous enterprise, as it will put the middle class in dire financial straits, which are the guarantors of the stability of status quo.
A decline in the income of the middle class, a majority of whom are now struggling to keep their heads above water, would fan the flames of instability, social upheaval, more inefficiency in the administrative sector and corruption.
