Domestic Economy
0

Unfulfilled Gov’t Promises

Unfulfilled Gov’t Promises
Unfulfilled Gov’t Promises

To assess the performance of a government, it is necessary to refer to statistics published by official institutions. 
Of all economic statistics, government spending, financing methods and their impact on money creation and inflation are more important than others. 
This was stated by Masoud Daneshmand, secretary-general of Iran Economy House, in a write-up for the Persian daily Jahan-e Sanat. A translation of the text follows:
When governments make economic plans for the coming year, they refer to controlling current expenses, identifying sustainable incomes, maintaining money market discipline and preventing the monetization of budget deficit as their priorities. 
The government of Ebrahim Raisi also took office by promising to control money supply and fight inflation. More than a year into his presidency, many economic promises have remained unfulfilled. Note that the daily creation of money has been above the average of the past years while the inflationary uptrend has continued.
The current anti-production policies can be blamed on the government’s failure to deliver on its promises. When the government speaks of containing the growth of money supply, it is vital to use the necessary tools. In fact, giving support to production enables the government to finance its current expenses from production revenues and not from money creation.
Last year’s statistics on money supply and inflation show that the government has only made promises regarding maintaining discipline in the money market, but has failed to use the necessary tools to boost production and businesses. 
Controlling inflation is the most important economic promises of politicians, but how is it possible for a government that suddenly removes the subsidies without thinking of an alternative to control price increases of up to 4-6 times to fight inflation? 
As said earlier, the main reason behind indiscipline in the money market, which has increased money supply and inflation, is lack of adequate production. Enterprises prosper only if producers take out big loans from the banks to import raw materials and export products. But since resources have been spent in the past few years [mostly to meet the financial needs of the government and state-owned companies], the banking system cannot grant loans to support production.
Communication with the world is also necessary if an enterprise intends to prosper by procuring raw materials for production and exporting its products. Isolating the economy and closing the door on the global economy have reduced the possibility of both imports and exports. Therefore, the government fails to materialize revenues it predicted in the budget law, so it resorts to money creation to tackle the lag in production. Hence, pinting money is the only way to finance current expenses of the government ([mainly wages of government employees] and this translates into the persistence of money creation and inflation.
 

Add new comment

Read our comment policy before posting your viewpoints

Financialtribune.com