Confab Discusses Ways to Tackle Economic Issues

Top officials, pundits and industry players convened as part of the second all-purpose Conference on Iranian Economy in Tehran on Saturday to discuss various economic sectors and the problems facing them, including those related to the monetary market.

First Vice President Es'haq Jahangiri delivered the opening speech at the closely-watched event and began by noting that Iranian challenges are interwoven, therefore dealing with them separately is not an option.

"None of these challenges is strictly restricted to the economic sector, as they have engaged the whole country and some of them are very old," he was quoted as saying by the official news portal of Iran Chamber of Commerce, Industries, Mines and Agriculture.

He referred to the significant limitations of the Iranian banking system as one of the most serious challenges, adding that lenders' woes have become so complicated that untangling them from a host of other issues has become impossible. Jahangiri pointed to a widespread and longstanding problem concerning inflation "that must be dealt with on the same scale" and the acute water shortage Iran is grappling with as other challenges.   

The next two mega issues the veep enumerated were unemployment, as more than three million Iranians–most of them university graduates–remain jobless and the prospect of worsening environmental issues.

The vice president noted that productivity issues have afflicted the Iranian economy, “about which we make remarks based on our own knowledge every year, but the challenge persists and has only resurfaced at various junctures”.

To face these predicaments head on, the official advocated a scientific and informed approach that would lead to consensus on potential fronts.

Jahangiri also announced that about 600 trillion rials ($14.3 billion) have been designated as government support for the ailing pension funds whose current dire state has been dubbed the next big crisis for the Iranian social security system in the next decade by the research arm of the parliament.

  Countering Bugbears

Masoud Nili, the special presidential aide for economic affairs, was the other keynote speaker at the annual event. He also singled out the banking system, pension funds and the annual budget as some of the most significant challenges bothering the Iranian economy.

He mentioned nine factors needed to tackle deep-rooted issues such as chronically-high inflation, high jobless rates, low median growth rates and a relatively high Gini coefficient.

Nili referred to them as efficient governance, stable economic climate, sustained and balanced interaction with other nations, continuous flow of finance, empowerment of human capital, effective organization to combat poverty, environmental safety, a vibrant private sector and an effective renovation of infrastructures with oil revenues.

“Iran’s long-term performance shows that even though the political will to instill growth exists, none of these nine factors has been witnessed in the Iranian economy,” he said.

The top presidential advisor pointed to the annual budget and the high tendency toward spending by governments and politicians as some of the major reasons sabotaging economic growth.

That is the “only converging point for all political groups in the country” in that politicians of all types become only more eager to spend when tax and oil incomes rise, he added.

Nili noted that this only harms the economy, as long-term government commitments rise, the monetary base expands and the budget deficit widens among other things.

“Iran has been known as the country with one of the most chronic inflation in the world,” he stressed, adding that the high inflation exerts an adverse influence on almost all economic variables, including energy prices and foreign exchange rates, creating a domino effect that will overshadow all sectors.

He detailed four potential unfavorable scenarios that could materialize if the current long-term trends of the Iranian economy persist, namely piling foreign debt, the rise of quasi-government entities, economic instability and high inflation.

“Should Iran choose to deal with them separately, it would fail and continue to grapple with them for years to come as it has in the past decades,” Nili said, calling for a unified and comprehensive approach based on verified information.

The major event also included a panel on banking policies presided over by Director of Monetary and Banking Research Institute Ali Divandari, a specialized panel on banking and financial institutions attended by a Central Bank of Iran advisor, and a specialized panel on job creation, in addition to a host of other panels on subjects varying from trade and tax policies to the energy market.