Iran: Economy Minister Urges Bank to Inject Cash Into Troubled Tehran Stock Exchange

Iran’s Minister of Economy and Finance Ali Tayebnia today convened an emergency meeting in Tehran of the CEOs of the country’s major banks to assess the liquidity of Tehran Stock Exchange (TSE) and urged them to inject cash into troubled stock exchange market, Tasnim News Agency reported on Monday. (Tasnim/Press TV, 11 May)  

The main index of TSE has been on a downward spiral lately because of low liquidity compounded by the oil slump. Tasnim reported that a number of institutional shareholders also blame TSE management policies for the recent losses. The news agency did not elaborate on specific management policies under question.

File photo: Tehran Stock Exchange (TSE) in a january 2011 photo during the height of its activities (IRNA/Press TV) 

Iran Lowers Oil Price for Budget to $40

Iran’s Minister of Finance and Economy Ali Tayeb-Nia announced today that Iran is revising its draft budget to assume an oil base price of $40 a barrel. The Iranian calendar and fiscal year begins on 21 March. Tayebnia added that in order to cope with falling revenues, the government will have to halt some projects. (Fars News Agency/Bloomberg, 15 January)

President Rouhani had presented a budget based on $72 oil to the parliament only on 7 December. That’s the budget that is now being revised to account for a $40 oil.

The price of Brent crude has fallen by 54 percent in the past year, forcing governments across the Persian Gulf to reduce spending, including cuts for subsidies on petroleum products and capital budgets. On Wednesday, Qatar Petroleum and Royal Dutch Shell called off plans to build a $6.5 billion petrochemical plant.

“Most Gulf countries are pricing $50 oil for 2015,” said Naeem Aslam, chief market analysts at Dublin-based Avatrade. “ (And) creditors want to be sure they recoup their money so there could be hesitation to starting up new projects.” (Bloomberg, 15 January)

Meanwhile, Brent futures price fell by 2% on Thursday and finished at $47.67. 

Photo credit: Iran’s Minister of Finance and Economy Ali Tayeb-Nia, center, announced revision of government’s proposed budget to account for a $40 oil.

State of Economy in Iran

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)