A Report by Thomas Erdbrink of The New York Times
Today, the Central Bank of Iran (CBI) reported that the country’s domestic industrial growth dropped by 27 percent in two years. Last month, the CBI reported that the national economy for the past Iranian calendar year that ended on 20 March contracted by 5.4 percent, with the inflation rate at 44 percent.
The economy is projected to shrink at least another 2 percent this year.
Thomas Erdbrink, the longtime Tehran correspondent for The New York Times, in an excellent piece published today, puts such numbers in perspective by quoting government officials on the dire economic situation in the country and reporting the day-to-day struggles of Iranian businessmen in an economy starved for cash.
The owner of a bus manufacturing company explains his daily routines of going to work and ordering cups of tea, and not much else.
“It looks like I’m working, right?” the owner, Bahman Eshghi, told Edbrink. “No. In reality I am praying, either for a miracle to save our economy or for a fool to come in and buy my factory.”
“Like a camel can survive in the desert on the fat in his hump, I have survived on my savings in recent years,” Eshghi added. “But now the end is near. I’m giving up.”
The frustrations encountered by Mr. Eshghi in trying to conduct normal business deals are by all accounts typical, Erdbrink reports.
Meanwhile, the new government, breaking with Ahmadinejad administration’s public denials of economic woes, is increasingly reporting the facts, like the negative economic growth numbers mentioned above. President Hassan Rouhani and his foreign minister, Mohammad Javad Zarif, are saying that the government’s financial condition is far more dire than previously disclosed.
Quoting Western economists, Erdbrink says the crisis point may be much closer than previously thought, perhaps a matter of months. Some lower-level Iranian officials and businesspeople are saying Iran’s economy is already on the verge of collapse. And Iran news outlets have reported that the government owes billions of dollars to private contractors, banks and municipalities.
Iran’s foreign exchange reserves are estimated at $80 billion. But the figure is misleading as fully three-quarters of the $80 billion is tied up in escrow accounts in countries that buy Iranian oil — the result of a U.S. sanctions law that took effect in February. Under that law, the money can be spent only to buy products from those countries. The access to the remaing $20 billion is also difficult – it has to be physically moved into the country as cash because of Iran’s expulsion from the global banking network Swift, which would have allowed the money to be transmitted electronically. (The New York Times, 1 October)
To read Thomas Erdbrink’s article, and detailed account of the difficulties facing the featured businessman in conducting financial transactions, please click here.
Photo credit: A currency exchange office in Tehran displaying rates in a window. Sanctions over nuclear efforts have starved Iran of cash. (The New York Times)