In recent weeks, rising prices of consumer goods have brought an elevated level of anxiety and discomfort to Iranians. They have caused the majority of the population to feel the pressure of inflation in their daily lives even more than before. Economists and analysts agree on the fact that due to the liquidity trend in Iran’s economy and the system of budgeting and money allocation, the rate of inflation will continue at a similar pace next year.
Printing money, a major cause of high inflation, has been a common practice in previous governments in Iran. Colossal levels of corruption, mismanagement of Iran’s rich resources, nepotism, embezzlements, bribery, have brought Iran’s economy to the brink of collapse with no light at the end of the tunnel. Analysts believe that considering the vulnerability of Iran’s economy, Iran’s President Ebrahim Raisi has no choice but to follow his predecessors and print more money, leading yet to higher inflation. Government officials, however, waste no time offering hollow promises, contradictory remarks, and false predictions. On the other hand, economists and analysts seem to paint a more realistic picture of Iran’s economy that follows a weakening pattern as days and weeks pass by. Below are a few:
– Mohsen Rezaei, the Deputy Minister of Economy, said that “domestic sanctions are ten times more expensive than foreign sanctions against producers” and “compensation for the government budget deficit should be removed from the people and there is no reason for people to pay both taxes and the government’s budget deficit.” Despite such statements, Rezaei, however, did not say what his solution was to remove the pressure from Iranians caused by “compensating the budget deficit”.
– Mohammad Mokhber Dezfuli, the first deputy chief to Raisi, who apparently visits different markets from time to time and asks about prices of different commodities, in the latest reaction to the appalling high food prices, called on the Ministries of Industry, Agriculture and Justice to take the necessary measures for a comprehensive inspection throughout the country. However, he did not explain what the “necessary measures” might be, what specific actions these ministries must take, and how he would hold these ministries accountable.
– In his speech at the farewell ceremony and introduction of the new Technical, Infrastructure and Production Affairs Deputy of the Program and Budget Organization, Masoud Mirkazemi, the head of the Program and Budget Organization, referred to liquidity and said, “Unfortunately, in previous years, due to the atmosphere of distrust, the investments of the private sector and the people were not directed towards economic growth, while the volume of liquidity exceeded 4,000 billion tomans.”
– Morteza Afgheh, a regime-affiliated economy professor at the Ahwaz Jundishapur University believes there will be no decrease in consumer goods, including food prices, any time soon.
“We are using our foreign exchange reserves to import goods, especially basic goods, and in the coming days, and as long as the issue of sanctions is not resolved, we will not be able to have foreign exchange inflows, so we will run out of reserves and we cannot buy goods,” he said.
“On the other hand, government borrowing is almost saturated and the country’s resources are depleted, and prices are expected to rise in the market,” he added.
– Ali Saadvandi, an economist, also said that inflation would follow the same trend in the upcoming Persian New Year in late March. He said economic growth cannot be expected until there was a change in next year’s budget bill in terms of deregulation, production barriers, and business facilitation.
– Vahid Shaghaghi Shahri, an economics expert and university professor, also said that the current amount of liquidity could increase inflation next year. One of the reasons for inflation in the Iranian economy is the issue of liquidity growth. “When liquidity is not absorbed by the body of the economy or the product of liquidity growth does not lead to economic growth, liquidity will be recognized as an inflationary factor in the economy.”
He adds: “The increase in liquidity is due to the weak structure of the banking system and the weak structure of the country’s budgeting system. In other words, the budget imbalance along with the imbalance of the banking system and the defective performance of the banking system has caused us to always see the growth of liquidity and, through the channel of liquidity growth, to increase inflation in the country’s economy.”
He described the increase in liquidity in the Iranian economy as a “straw warehouse” and said that “inflation expectations remain like a spark and fire. “A barn full of straw does not catch fire on its own until there is a spark, therefore, next year, if the JCPOA talks succeed, inflation expectations will be controlled, and this warehouse full of straw will be away from the fire for the time being. But if concerns about the future of Iran’s economy resurface, inflation expectations will act as a spark.”
“Iran’s economy is a non-productive economy and a profit-based economy. Budget imbalances and banking imbalances are also the roots of liquidity growth in the country. Unfortunately, we still have these two main roots in creating liquidity, while the structure of Iran’s economy is not production-oriented and is mainly focused on business and unproductive sectors. Therefore, liquidity does not end up in the productive sector of the economy, and increasing liquidity cannot be a stimulus for production and economic growth in the country,” he added.
The regime’s economic report card
Regardless of who says what and why, it is now common knowledge that the fabric of Iran’s economy is based on profit and corruption, regardless of its catastrophic consequences. The fact that 70% of the population have fallen below the poverty line, close to 50% inflation, close to 20% unemployment, the outpouring of capital from Iran, major brain drain, and the worsening living conditions of ordinary citizens, while government officials and regime elites become wealthier, draws a clear picture of the misery the people of Iran have to face every day.
Source » eurasiareview