Iran @ Brookings

« Previous | Next »

Iran Press Report: Handing Over the Keys to Iran's Economy

As we draw ever-nearer to the beginning of Hassan Rouhani’s presidency, commentators in the Iranian press have widely lamented the condition in which Ahmadinejad will hand over Iran’s economy to his successor. Mohsen Bahrami in Arman argued that while Mohammad Khatami left Iran’s economy in decent shape, with a 900-toman-to-dollar exchange rate, 5.5% growth, and a healthy foreign exchange reserve despite oil prices having been only $15 per barrel, Ahmadinejad is leaving office with “42% inflation, 500 trillion toman liquidity, zero economic growth rate, and a double-digit unemployment rate,” and is not carrying out required price hikes in energy, forcing Rouhani to preside over the unpopular move.   In the energy sector, Mohammad Hossein Jafarian complained in Qods that Iran continues to only produce one-twentieth of the gas output from the shared South Pars field that Qatar does, despite Ahmadinejad’s promise last year that the output would double by the time he left office. “We are nowhere near realizing this goal and the physical progress and development of the active phases has not even reached 65% completion.  Where does the problem lie?”

Yusef Najafi, in the reformist Bahar, warned that the economic platform laid out by Rouhani aide Mohammad-Baqer Nowbakht was too close to the policies of Ahmadinejad – particularly with regard to plans to continue the system of targeting cash subsidies at Iran’s lower-income population, which was the cause of much conflict between the outgoing president and the Majlis.  Noted reformist commentator Abbas Abdi went a step further in Etemaad, arguing that the current form of cash subsidies is illegal under Iranian law and will weaken Iran’s economy and thus Rouhani’s government if he continues to implement it when he takes office. 

There have been a few defenses of Ahmadinejad’s record, such as an article by Khosrow Motazed in the pro-Ahmadinejad daily Iran.  He argued that thanks to the crowd mentality of Iranian politics, “the easiest thing to do is to put the blame for all the failures and bad events in the 2800 years of Iranian history on the shoulders of Dr. Mahmoud Ahmadinejad,” but that Ahmadinejad’s efforts at economic stewardship were no match for the all-out pressure of American-led sanctions. He also cautioned that those who have “a utopian vision of August 3, 2013” – Hassan Rouhani’s inauguration day – will be disappointed to find out that Washington will not “roll out the red carpet” and seek a resolution to the dispute between the two nations.

Across the spectrum, commentators condemned what they see as the ludicrous gap between the official economic statistics reported by the government and the true state of the Iranian economy.  Saying that “the difference between expert statistics and Ahmadinejad’s statistics is as wide as the distance between earth and sky,” Hamid Jafari in Bahar cited as examples a difference of 1.04 million barrels/day between OPEC’s figures and government figures for Iranian oil production and the World Bank insisting economic growth of only 2 percent in 2011-12, not the 3.2% published by the Statistical Centre of Iran.  Mehdi Nosrati in the economic daily Donya-e-Eqtesad argued that this leaves Rouhani with tough political choices: “The next government has three options: 1) Continue with the current government process of developing statistics; 2) Work to correct the statistics, which will suddenly result in many variables including inflation, growth, investment, and employment looking far worse, and will make the new government appear to be responsible for worse economic conditions; 3) Refine the statistics of recent years to reform the time series of data and show the people the true state of conditions, which in and of itself will be difficult.” In addition to slamming the “false and fake statistics” presented by Ahmadinejad’s government, Zia Mesbah in the reformist Shargh argued that Rouhani needs to right the economic wrongs of the past by pulling the public sector, aided by government revenue, away from its competition-stifling presence in the economy, and allowing for conditions to make the private sector flourish.

In other economic news, there has been much discussion over the recent move by the Central Bank of Iran to unify the previously two-tiered exchange rate, which means a higher cost of foreign exchange for importers who had been able to access the preferred rate.  While there is largely consensus that this will raise some prices, the move has split opinion.  Pooya Jebel-Ameli in Donya-e Eqtesad argued that it will cause short-term pain, but with higher expectations for the economy emerging from the Rouhani election and increased stability in the exchange market in recent weeks, this was the right time to make a necessary decision for Iran’s long-term economic stability.  However, returning to the refrain of blaming Ahmadinejad, Jomhouri Eslami argued that the move will irresponsibly cause a sharp increase in consumer prices for staple goods: “The tenth government apparently wishes to, until its final day in office, make strange decisions and prove that experts and technical and economic considerations have no importance to them.”


APPENDIX: Translated Summaries of Selected Opinion Pieces (Newest to Oldest)

“Seven Economic Rocks in the Way of the Next Government.”  Mehdi Nosrati, Donya-e Eqtesad, 27 Tir 1392 / 18 July 2013.

In the business daily Donya-e Eqtesad, Mehdi Nosrati lays out what he sees as the seven primary economic problems that face the incoming government of Hassan Rouhani.  He cites incorrect statistics, the dual issue of high inflation and liquidity, high levels of government debt, persistent unemployment and nonexistent job growth, the cash subsidy program, improper privatization, and the extensive role of quasi-governmental organizations in the economy.  He insists that, due to the difficulty of making effective policy without accurate data about the state of Iran’s economy, statistical problems are Iran’s number one concern.  “There exist serious differences of opinion regarding many statistical indicators.  The next government has three options: 1) Continue with the current government process of developing statistics; 2) Work to correct the statistics, which will suddenly result in many variables including inflation, growth, investment, and employment looking far worse, and will make the new government appear to be responsible for worse economic conditions; 3) Refine the statistics of recent years to reform the time series of data and show the people the true state of conditions, which in and of itself will be difficult.”  He also suggests that unemployment is compounded by other policy choices that have been followed by the current government, and with large numbers of youths emerging from universities into the job market, the crisis of zero job growth is set to expand.

“Everything is Ahmadinejad’s Fault.”  Khosrow Motazed, Iran, 27 Tir 1392 / 18 July 2013.

In the pro-Ahmadinejad daily Iran, Motazed writes that attempts to pin the blame for Iran’s economic troubles on the outgoing president are unfair.  He argues that the unprecedented sanctions against the Islamic Republic are responsible for Iran’s predicament, and that this “all-out pressure by the foreigners” would have occurred under any president.  He writes that Ahmadinejad tried his best to right the economy, but that he had no chance in the face of a coordinated anti-Iranian policy.  Citing that he has previously written that, in today’s Iran, “the easiest thing to do is to put the blame for all the failures and bad events in the 2800 years of Iranian history on the shoulders of Dr. Mahmoud Ahmadinejad,” he argues that those who have “a utopian vision of August 3, 2013” – Hassan Rouhani’s inauguration day – will be disappointed to find out that Washington will not “roll out the red carpet” and seek a resolution to the dispute between the two nations.

“Where Are We Standing?” Hamid Jafari, Bahar, 26 Tir 1392 / 17 July 2013.

Jafari, writing in the reformist Bahar, tries to sum up where Iran stands in terms of various societal and economic goals, but says it is difficult do so because “the only tangible impact of the Ahmadinejad years came in the form of creating statistics.”  He goes on to say that it is clear to any casual observer that something is wrong when “the difference between expert statistics and Ahmadinejad’s statistics is as wide as the distance between earth and sky.”  He cites as examples a difference of 1.04 million barrels/day between OPEC’s figures and government figures for Iranian oil production and the World Bank insisting economic growth of only 2 percent in 2011-12, not the 3.2% published by the Statistical Centre of Iran.  He writes that the point of his argument is simply to urge “Rouhani’s advisors and inner circle to form a working group so that we may see how deep we have fallen into the crisis that we have dealt with for the past eight years.”

“Differences Between Two Presidents.” Mohsen Bahrami, Arman, 25 Tir 1392 / 16 July 2013.

In the reformist Arman, Bahrami writes a comparison of the final days of Mohammad Khatami’s presidency eight years ago and those of Ahmadinejad now, with an emphasis both on Iran’s economic condition and the actions taken by the outgoing presidents in preparation for their successors’ inaugurations.  He first notes that Khatami left at a time when inflation and unemployment were both around 10 percent, total liquidity was 60 trillion tomans, a dollar was worth 900 tomans, and GDP growth was 5.5%.  Not only this, he says, but Khatami refrained from wasteful or populist spending and transferred an oil reserve fund of $15 billion, accumulated during a time when oil was only $15 per barrel, to his successor, transferred a surplus from the executive office budget to Ahmadinejad, and purchased goods, such as a presidential plane, that he knew would only be used after his term ended. Meanwhile, he argues that not only has Ahmadinejad presided over a drastic downturn in the economy – with “42% inflation, 500 trillion toman liquidity, zero economic growth rate, and a double-digit unemployment rate –“ but he has put off unpopular tasks required of his government, such as the law-mandated increase in energy prices, so as to make the next government “face a dangerous period at the start of its term.”

“The Next Step for Currency Policy.” Pooya Jebel-Ameli, Donya-e Eqtesad, 25 Tir 1392 / 16 July 2013.

In the economic daily Donya-e Eqtesad, Jebel-Ameli writes happily that “finally the Central Bank was able to unify the exchange rate,” and suggests that this was the opportune time to do so given that the currency market had finally reached some degree of stability in recent weeks.  While he still feels that there is much work to do given the significant gap between the government’s unified exchange rate and the open-market rate, and that certain elements of society will oppose the move due to the short-term higher prices it will undoubtedly bring, he says that the new system will allow for efficient policy decisions to be taken.  He also notes that the sale of government dollars at the higher exchange rate will have a mitigating effect on inflation by pulling rials out of circulation.  He also suggest reasons for the recent stability that allowed for the decision: “Even though strict sanctions were leveled by the United States on Iran’s economy on July 1, the currency market was not affected.  Why? The reason was that positive expectations for the future were greater in magnitude than the sanctions that had been signed by Obama at the start of 2013.”

“High Prices Have Been Planned!” Jomhouri Eslami, 24 Tir 1392 / 15 July 2013.

In an unsigned editorial, the daily Jomhouri Eslami  writes that the recent move by the government to unify Iran’s official exchange rate is a risky proposition that will lead to broken promises and higher prices for basic goods down the road.  “The tenth government apparently wishes to, until its final day in office, make strange decisions and prove that experts and technical and economic considerations have no importance to them.”  It argues that it is true that the multiple exchange rate has long been seen as an inefficiency, but insists that the move being taken by the Central Bank under Ahmadinejad is not going to fix the problem.  Ideally a market-decided rate should be allowed, the paper continues, but the current plan to keep the prices of basic food commodities low by subsidizing importers to account for the higher price of the dollar is unsustainable – particularly given the fact that the government does not have a history of effectively providing such subsidies in a timely manner, which has led to high prices for staples like butter and medicine, to name two examples.