Omid Memarian
omid@memarian. info
In an interview with Rooz, prominent Iranian economic analyst Saeed Leilaz cited recent data released by the country’s Central Bank which indicate falling standards of living, increasing income inequality and corruption in society, to evaluate the failure of administration’s economic policies and their effect on people’s daily lives. According to this economist, the years 2009 through 2011 will be stormy years for the Iranian economy. Here is the interview.
Rooz (R): Mr. Ahmadinejad has recently defended the country’s economic situation. As we know, economic promises were among the most important reasons for his election to the presidency, so how different are present conditions than the promises that were initially made by him?
Saeed Leilaz (SL): Recently, Mr. Ahmadinejad is shying away from repeating his earlier slogans and we don’t see them in his speeches anymore. This is because very bad results have taken hold of the country in the past few years. Government officials release data and figures much of which, unfortunately, is not real. If you have paid attention to the 2005 and 2006 performance reports recently released by the Central Bank, you will see that the president’s promises have by no means been realized. In terms of social welfare and decreasing income gap as well as fighting corruption, not only are we not in a better situation compared to before, but conditions have become much, much worse. The report that the Central Bank released last week shows that that the social welfare indicate for 2005 grew about 6.5 percent compared to 2004, but in 2006 it grew by only three percent. Meanwhile, in 2006, the income gap has increased as well, the main reason for which is growing inflation. In none of the economic indicators such as growth in investment, fighting corruption, reducing income gap, inflation or social welfare, our situation is better than before. One must note that Iran’s revenues now are one billion dollars every three days, an income unprecedented in Iran’s history.
R: In light of the fact that more than 50 economists have warned the president of the repercussions of faulty economic policies, how could Mr. Ahmadinejad continue to provide such analyses and defend his economic policies?
SL: There is no outlet for voicing criticism. No one can say anything. Reformist newspapers have very limited circulation due to pressures on them. If we divide the country’s media into 100 parts, we can safely say that 99 parts are the national television and radio, which are controlled completely by the president. However, despite the administration’s propaganda, other than in the export section, which is largely driven by high crude oil prices, we see no other improvement in economic indicators. With respect to some indicators of corruption, I believe that we are in unprecedented times in Iranian history. If you pay attention to corruption indicators, including the banking system’s suspended assets, which is also taking place in customs duties, you see rents in different sectors such as cement, automobiles and bank loans. Until now, such a pillage of public funds has been unprecedented and, ironically, this is taking place in Iran under the cover of economic justice slogans.
R: How palpable are the effects of such factors on people’s daily lives?
SL: Figures released by the Central Bank show that the income gap is increasing in Iran. The most important factor accounting for this increase despite the increase in government subsides is inflation. And inflation is very palpable. You know that the rate of inflation is four times what is was 27 months ago. I do not think there is a country in the world whose inflation rate is 4 times what it was 27 months ago. We have had this experience. Inflation has had a very palpable effect on the daily lives of the people – especially the country’s poorest segment. But in other areas it gradually shows its effects as well.
For instance, the decreasing pace of foreign investment in Iran as a percentage of Gross Domestic Product is worrisome and has reached its lowest level in the past 10 years. You can see its effects on the country’s power network, or many of the country’s areas – especially the Northern are of Iran – where water supplies are disrupted. You can also see the effects of this on areas such as food products imports. For example, we will be one of the largest importers of what in the world this year.
Unfortunately, the eighth Majlis has been unable to stop this trend. For this reason, I predict that the total value of imports of good and services in the Iranian economy would reach and even exceed the eight billion dollars figure. This is an extremely frightening number. It means that we are importing about $1,200 for every Iranian. Although they have tried to at least temporarily mitigate the effects of mismanagement on people's lives by importing huge volumes, the effects on people's lives are still palpable. However, we would see even more dramatic effects in the future. I believe that the decreasing pace of investment in Iran would demonstrate its horrific effects from 2009 on. In other words, due to decreasing pace of investment in Iran, the years 2009 through 2011 would be stormy years for the Iranian economy.
R: What political, social and economic implications would such changes have?
SL: Inflation exacerbates poverty and income inequality in the country. However, with respect to lower investment rates, that increases unemployment. Even though the ninth administration has spent hundreds of billions of dollars, the unemployment rate has not moved much. Central Bank's figures indicate that fewer than 800 thousand jobs have been created each year, which is opposed to the government's claim that 1,200 thousand jobs were created in 2006. In other words, the number of unemployed is increasing in the country. The Minister of Labor warned recently that the unemployment rate may increase in the future. The weakness of the country's infrastructure, such as water, gas and power networks has also made its effects evident. You now see that, after years, we have serious problems in all these fields and this is only the beginning of the crisis. In 2001 the investment rate grew by 14 percent but it stalled to 3 percent in 2006 and about 4-5 percent in 2007, which means lower than Iran's GDP growth rate.
R: How would economic conditions impact the upcoming presidential election?
SL: If free elections are held, I am very doubtful about Ahmadinejad's reelection, because none of the country's political and social currents are seriously supporting him. His recent trip to Yasouj was very disappointing in terms of his reception. If free elections are held, you would see the impact in lower number of votes for Ahmadinejad.
