A Sobering Report by the Minister of Economy
On Thursday, Iran’s Minister of Economy Ali Tayeb-Nia addressed the Assembly of Experts on the country’s state of the economy. The highlights of the speech are listed below, translated from Farsi. Mehr News Agency published the original Farsi text on 7 March.
- The rate of economic growth for the calendar year 1391 (ending March 2013), the latest date when the annual reporting on the growth rate is available, was at negative -5.8 percent. Taking into account the population growth rate, this means the per capita income in the country was reduced by 7 percent in just one year, a “dangerous situation” for the country.
- The negative growth continues to this day. The government is trying its best to arrest the decline and reach zero rate of growth during the next calendar year (starting March 21, 2014). The minister expresses his regret for having to offer a zero growth as good news.
- The unemployment rate grew rapidly, with the country losing more than 200,000 jobs last year, and losing even more this year. The unemployment realities do present a “serious threat to national security.” A more “disturbing development” is the fact that the unemployment among the youths grew at much faster rate. Not good for the country’s future.
- The annual inflation rate for the period ending March 2013 was at 32 percent. The inflation rate rose to 42 percent in July. The government is hoping to lower the rate to 25 percent during the next calendar year.
- The combination of 42 percent inflation rate and -5.8 percent negative economic growth rate, a combination of high inflation and serious stagnation, is “unprecedented in the country’s history.” It presents serious policy challenges to fight both.
- The investment activities countrywide have also declined, registering a negative -22 percent growth for the period. The worst-hit sector is construction with a negative -32 percent growth rate. The agriculture is the only sector that had a nominal growth rate.
- The government budget in 1391 was at 210 trillion toumans (approximately $88 billion). But the government’s revenues were at 114 trillion toumans ($48 billion). A huge gap between the government’s revenues and expenditure.
- In the current year, the government has paid out 42 trillion toumans ($18 billion) in cash subsidies, equally divided to all citizens. This is four times the development budget of the government; four times as amount we amount in the future of the country is paid out in cash now. Meanwhile, the savings from elimination of energy subsidies under the subsidy reform program amounted to 28 trillion toumans ($12 billion) during the same period. So under our current reform program, we are saving 28 trillion toumans a year, but handing out 42 trillion toumans. The difference is being paid from government’s general budget.
- We have also borrowed 42 trillion toumans ($18 billion) from the Central Bank to build 2.3 million units of affordable housing.
- In fact, we are paying for the cash subsidiary shortcomings and building affordable housing by printing money, causing high inflation, forcing everyone to pay higher prices for goods and services. We cannot get out of stagnation by continually printing money!
- The country’s business environment index has plummeted and now ranks 158th among 180 countries. This is "not what the country should be proud of."
- The privatization program has also not been implemented correctly. Only 3 (three) percent of all privatization “transactions” are real. This administration is aiming to reach 100 real transactions in privatization area.
- The “illogical and unacceptable” growth in imports has created a precarious situation in the country, making the negative effects of the economic sanctions even worse that they should been.
- What we have now is not an “economy of resistance.” It is a kind of economy which is making us “more dependent on foreigners.”
- On sanctions, the biggest adverse effects have been on revenues from oil and petrochemical exports. The shortage (of revenues) has in turn created a hazardous situation where the imports of raw material, intermediate goods, and machineries have been practically halted, with all its negative effects on the country’s production activities and future employment.
File photo: Iran's Minister of Economy Ali Tayeb-Nia (Mehr News Agency)