Expert: Public economics in Iran can not meet social demands

Business Materials 11 May 2019 13:04 (UTC +04:00)

Tehran, Iran, May 11


The government should understand that the patrimonial rentier economy that depends on oil revenues is not able to meet the public demands, Iranian economic expert Mahmoud Jamsa said in an interview with Trend.

"The budget dependency on oil has caused a weak economy in Iran and led to the abnormal assigning of sources to the budget. The government is managing monthly salaries of seven to eight million people amounting to about $59.5 billion, which is extremely high figure. Meanwhile, the country's current oil revenues have dropped due to the sanctions and all the foreign currency channels are blocked. These factors, in their turn, will affect both the economic development and the population’s incomes and, therefore, put pressure on the government," the expert noted.

"The wrong policies and delay in the Central Bank of Iran's response to the new challenges will cause another round of inflation and an increase in prices, thus reducing people purchasing power. Furthermore, bad economic and political situation has led to accumulation of wealth among a few people who have more influence than the government and can interfere in economic affairs and raise the prices," he said.

Jamsaz insists that the government efforts to maintain the market stability have failed. "All the developed countries that function via competitive market use new approaches to improve social welfare and economic security, but we are moving backward to coupon system. It means that there is a serious drawback in our economic system, which, unfortunately, is not based on the principles of the free-market economy; it is rather run by instructions of those who seek personal gains and profits or ruled by an ideology that does not consider the national interests," the expert added.

"At the moment, we have reached a point where there are expensive prices, ordinary citizens can not afford the high cost of living, and the government takes temporary steps to reduce the tension in the market and goes back to coupon system. Perhaps, introduction of the coupon policy will be sufficient in the short-term, but experience shows that the prices will increase, since the government does not have the necessary tools to manage the prices of consumer goods," he said.

The economists noted, "The government's foreign exchange policy (determining the official exchange rate) has led to the rise in foreign currency rate in free market. The government should realize that the oil industry and public economics can not meet the social demands or ensure reforms. Therefore, the economic officials should change their approaches, while the government should not meddle in economic affairs, as this would limit private sector activities."

He continued by saying, "Currently, the government does not apply any innovative approaches and even if it invests in some sectors, it is waste of resources. For example, the amounts spent for the construction of shopping centres could be allocated to other sectors. If we compare the International Imam Khomeini Airport with airports in Dubai, Qatar and Kuala Lumpur, we can see a big difference."

"In the meantime, prioritizing infrastructures and economic structures is not considered important. Since the government does not pay due attention to important sectors, many projects remain uncompleted. It looks like the government has no solution except going back to introducing coupons," the expert added

Answering the question whether the free economy has its own disadvantages, he said, "Any system has advantages and shortcomings, but this system is superior to others. If we compare North Korea and South Korea, we can see how the government policy impacts ordinary people's life."

The expert added, "In general, the free-market competitive economic system shows better results in terms of people’s well-being, than public economics. In the current crisis situation, moving toward free economy can be a solution under the conditions that logic prevails over conservative mentality and the decision makers are experts in economic issues."