Iran under the Hassan Rouhani administration hit all records and placed as the first administration in the economic crises term throughout the whole Islamic Republic history. He has raised huge and astronomical debts more than any previous administration, and in the field of rising inflation and liquidity, none of them can match his record.
The negative economic growth of the 2000s, much of which was in the hands of the government which rose from the “reformist faction,” has been a disgrace. The completely wrong and irresponsible management in the face of coronavirus has also left thousands of dead and poor people in the country.
One of the most important tasks that Rouhani has mentioned in his record is the issuance of bonds for administration financing. The total number of financial bonds approved in the budget bill and bonds that have been published with the agreement of the Supreme Economic Coordination Council reaches 2.3 quadrillion rials [$7.66 billion]. The issuance of this volume of securities means that the administration must allocate higher amounts at the time of the annual maturity to pay the principal and interest on the securities.
Rouhani’s administration has resorted to high taxes to cover deficits and its expenditures, transferring administration property at low prices, and most recently, selling shares of state-owned companies in the stock market, which play the role of a piggy bank for the administration’s spending and financing bankrupt companies.
However, perhaps the most destructive economic actions of the Twelfth Administration have been to sell more debts and turning to a ‘Ponzi Game’. Selling bonds to repay previous debts, selling even more of these bonds to pay off new debts, and the growing interest of these bonds, which are a serious threat to the Greekization of the Iranian economy.
Selling the Future of the Next Generations by the ‘Ponzi Game’
“According to the laws contained in this year’s budget bill, the administration can issue 800 trillion rials [$2.66 billion]of financial securities. Due to the special economic situation, the Supreme Economic Coordination Council issued a permit to issue 1.5 quadrillion rials [$5 billion] of surplus securities to increase the total marketable securities of the administration to 2.3 quadrillion rials [$7.66 billion]. Many deny the importance of financing from here and believe that this approach has no result other than selling the future,” according to Jahan-e Sanat daily on October 7.
With the extreme use of the sale of bonds, the administration enters the cycle of the Ponzi game and in order to repay the principal and interest of these bonds at maturity, it is forced to issue new bonds, which naturally have a higher interest rate. In this way, over time, the debt burden will only increase, and we will see an administration debt crisis in the coming years.
Government-linked experts believe that the path taken by the Rouhani administration is the same as that taken by the Greeks two decades ago which led to bankruptcy. They owed so much that they had no choice but to surrender to the creditors. One of the important indicators in this field is the ratio of debts to Gross Domestic Product (GDP), which according to the estimates of the Parliamentary Research Center is projected to be between 60 and 74 percent in the coming years.
According to official statistics on the debt of the administration and state-owned companies last year, this figure has reached over 10 trillion rials [$33.3 million].
“Administration debt reached 5 quadrillion rials [$16.6 billion] by the end of September 2019. Also, the debt of state-owned companies has increased to 5.25 quadrillion rials [$17.5 billion]. In total, the debt of the administration and state-owned companies reaches 10.25 quadrillion rials [$36.165 billion],” according to Eghtesad Online website on June 23.
An economic expert from the rival faction to Rouhani said to him: “We warn the system of fundamental decisions that this path, that is relying on foreign currency and rial debts, puts us on the path of the swamp. This process of advancing in the swamp will create a dangerous path for us,” ILNA news agency wrote on January 6.