Iran Economy NewsTreating Stagflation, Only by Restructuring Iran’s Economy

Treating Stagflation, Only by Restructuring Iran’s Economy

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For the past century, revenue from the sale of Iran’s oil has filled the pockets of the dictatorships in this country, especially that of the theocratical rule. What has been ignored and neglected is the scientific, economic, technical, and educational development of the country and its people.

Every time the rulers faced a problem or challenge, they have chosen the simplest way which is further opening the oil valves.

Knots that could be untied with the main source of the country which are the people and helping the development, welfare and prosperity of the country have become more blind, and the benefits of the oil money flowed in the pockets of the rulers, and its consequences becoming the chains of poverty and misery of the people.

Now after one hundred years of corrupted rulers, the country’s economic and social damages are unsolvable.

One of the biggest challenges and gaps in Iran’s economy which are now becoming visible, because the government has lost its main source of income which is oil, are inflation and the stagnation of the economy.

The government and the mullahs’ rule are no longer capable to solve both the social and economic crisis at the same time and are forced to choose between them.

But whichever has priority, the other will act like an unstoppable wildfire which will hurt the country and people. Even the government’s specialists are confessing that the rule has lost the time in these 40 years to solve the country’s economic problems. And they are not able to reverse that time anymore unless heavy changes are made in the future.

Controlling inflation and creating a recession or economic boom with money printing has reached a dangerous stage. Iran’s economy is at a difficult juncture this year, with rising inflation, especially in the last three years, while many officials fear Iran’s fate will that of Venezuela. On the other hand, any boom requires a lot of money to be injected into the market, which in turn will further increase inflation.

“Iran’s economy is in a difficult situation. Recession and inflation are the most important economic problems that Iran is facing in 2021, and if it (Government) does not have a plan for it, this situation will be transferred to the following years, in which economic development plans will no longer make sense.” (State-run daily Arman, April 17, 2021)

Mehdi Karbasian, a government economist, said: “Iran’s economy has been suffering from stagflation for years and this procedure is one of the rare economic diseases in the world. That is, countries are either in recession or inflation and stagflation are very rare. But unfortunately, over the past decades, we have also had serious stagflation at times.” (Mashregh, April 17, 2021)

He points to inflation above 40 percent, which is felt in the items and food of the weak strata of society, i.e., the fourth and fifth deciles, close to 70 percent of the society, and on the other hand, the recession has reached a point where GDP has been negative for several years and we see that the economy has shrunk over the past year or two, and in one year in 2019 the country’s economy shrank by 12 percent.

The inevitable result of this situation is dissatisfaction.

“There has been a fundamental change in the context of Iranian society that can no longer be denied. This event is the turning point of society in the satisfaction curve and the flow of satisfaction.

“The twelfth government no longer has the money to give to the higher institutions and the regulatory bodies, and they fall from the satisfied rank to the line of the dissatisfied. It no longer has the money to give to the workers, so the workers are also dissatisfied.

“Iran’s education and health personnel are dissatisfied because of the government’s inability to increase wages and salaries due to a lack of welfare funding.

“There is no money left to pay farmers to buy wheat. Journalists, footballers, writers, intellectuals, as well as government employees, and more importantly, actors and key players in politics and economics, are also dissatisfied.” (Jahan-e-Sanat, April 17, 2021)

And now the sweet dreams of all officials and experts of this regime in returning the situation to a previous state are fade away and “now, at the beginning of 2021, we are facing a society full of all kinds of problems, and it seems that Iran’s economy is falling apart, and the consequences of this event will sooner or later affect other sectors such as politics, culture and social affairs.” (Jahan-e-Sanat, April 17, 2021)

And these phrases are evidence enough: “As in 2020, there is no empty capacity of stock exchanges and debt securities to compensate for this deficit and prevent the monetization of this deficit.

“How is the stock market and the debt market (capital market) supposed to finance a total of about 300 trillion Tomans of the government’s budget of 840 trillion Tomans in 2021, which is equivalent to 35 percent?” (Kayhan, January 26, 2021)

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