Domestic Economy

Prosperity Demands More Than Lifting Sanctions

Prosperity Demands More  Than Lifting SanctionsProsperity Demands More  Than Lifting Sanctions

The economic achievements during the past months have strengthened Iran's stance in nuclear negotiations, enabling the country to hold successful talks with the world’s major powers, Minister of Finance and Economic Affairs Ali Tayyebnia said on Sunday, noting however that not all economic problems are to be solved with lifting of the sanctions.

“They [the West] began to acknowledge the nuclear rights of Iranians when they realized that they failed to force us to bow to the pressure of sanctions,” Tayyebnia said in a meeting with board of directors of Iranian banks, hoping that Iran will reach a final agreement with the P5+1 group (the US, the UK, France, China, Russia and Germany) for a complete lifting of the sanctions and subsequent improvement of the economy.

After months of negotiations Iran and the P5+1 reached a framework for an agreement to end a decade-long standoff over Iran’s nuclear energy program. According to the plan, Iran is to scale back the number of installed centrifuges, in return for the United States and the European Union lifting the current sanctions regime.

"It would be naïve to think that all the economic problems that the country has been dealing with will be solved with the removal of sanctions, as the economy is suffering from three structural deficiencies, namely lack of economic balance that is inherited from before the Islamic Revolution, overreliance on oil and economic mismanagement in the past few years,” the minister remarked.

Although the removal of sanctions will to some degree help improve the economy, it is not going to tackle the chronic recession and inflation, he added.

The economy plunged into recession during the final months of the previous administration. The incumbent president, Hassan Rouhani, has on several occasions vowed to bring the economy out of recession. Statistics released by the Central Bank of Iran (CBI) show that Rouhani has so far been successful in taming Inflation and recession.

Based on the  statistics released by CBI in December last year, Iran's economy grew by 4 percent in the first half of the last year (ended March 20),  ending two consecutive years of negative growth.

Tayyebnia further referred to “credit crunch” as a major factor that has exacerbated the economic recession, saying on the one hand liquidity increased as a result of increase in money base as well as the hard money that was injected into the economy by the CBI, and on the other businesses were faced with dwindling financial resources.  

“If you ask businesses what their biggest problem is, their answer would be credit crunch and lack of adequate resources,” the minister noted.

He criticize banks for engaging in unrelated non-banking activities such as investment and accumulation of wealth, and subsequently failing to conduct their real duty, which is to lend to the private sector.