Why is there a shortage of medicine and why are the available medicines so expensive? Why is each egg priced at 40,000 rials? Why is the exchange rate of the US dollar above 360,000 rials? Why are home prices astronomical? And the whys continue.
Don’t make a mistake; people are not looking for answers, as they already know them. People ask these questions to remind the government of the ground realities, especially officials who used to claim sanctions are inconsequential. People pose these questions to tell officials of what the removal of import subsidies has done to their lives. The faulty economic decision-making of the government has given rise to problems in the real economy and economic expectations.
Morteza Afqeh, an economist and university professor, prefaced his article for the Persian-language daily Ta’adol with this note. A translation of the text follows:
In the real sector of the economy, wrong decisions were made one after the other. The government removed import subsidy overnight, printed money and borrowed to tackle the budget deficit, which decisions dealt consecutive blows to the economy.
In the unreal sector of the economy, when it comes to inflationary expectations, the country’s officials rejected sanctions as insignificant and led the economy to dangle from a dangerous cliff, similar to abandoning a tied-up person at the edge of a mountain.
What did authorities do in the face of problems? They engaged in making oversized promises and not fulfilling them. They said they would not tie the economy to sanctions, they would build one million homes in one year, create 1.5 million jobs and halve the inflation. Each piece of news on sanctions, however, sent markets into turmoil.
One million homes were not built, inflation increased and other indicators also deteriorated.
The removal of subsidies created the same circumstances; no one took heed of the warnings of experts regarding the future of medicine, inflation and shortages. It was clear from the beginning that the government won’t be able to keep its smallest promises without resolving sanctions, let alone big promises such as building one million homes and turning the inflation rate into a single-digit. The government consulted unqualified economic analysts over that period of time and people paid for their dangerous ideas.
Running the country on people’s money was the main economic decision of the government that believed in compensating all its inefficiencies by paying cash subsidies worth 3-4 million rials to each person, so it removed the import subsidies. The move did not help people’s purchasing power; it rather widened households’ income gap. Challenges troubling people today are the outcome of the government’s economic decision-making system.
The government’s mistakes were not restricted to the economy. They also miscalculated in social and public spheres. In one of its moves, the government strengthened morality police instead of improving production and business environment. Such a course of action led to the tragic death of Mahsa Amini and the ensuing protests.
These unrests have brought about social, political, cultural consequences and increased instability and economic risks.
Reverse engineering must be employed to solve the problems, i.e., all wrong decisions must be undone. Sanctions must be lifted; banking, taxation and subsidy systems must be overhauled; inflationary expectations must decrease and command economy must end. Then, we can be hopeful about the improvement of economic indicators.
