Inflation fuels anger toward Ahmadinejad

Iran Materials 27 December 2007 22:46 (UTC +04:00)

( AP ) - A sharp rise in inflation has provoked fierce criticism of hard-line President Mahmoud Ahmadinejad - not only from his reformist opponents, but also from senior conservatives who helped bring him to power but now say he is mismanaging the economy.

Ahmadinejad was elected in 2005 on a populist agenda promising to bring oil revenues to every family, eradicate poverty, improve living standards and tackle unemployment. Now he is being challenged for his failure to meet those promises.

Reformists and even some fellow conservatives say Ahmadinejad has concentrated too much on fiery, anti-U.S. speeches and not enough on the economy - and they have become more aggressive in calling him to account.

In a rare gesture, Ahmadinejad admitted last week that inflation existed but blamed it on his predecessors, the conservative-dominated parliament, state-run media and bank managers who misused their power and printed too many bank notes.

"Inflation has its roots in the past," Ahmadinejad said in a televised speech.

His comments were denounced from all sides, with economists and some fellow conservatives saying it is his policies that have led to higher prices.

Ahmadinejad's critics point out that more than 80 percent of Iran's government revenues come from crude exports and that inflation has risen under him despite sharp increases in oil prices to near $100 per barrel currently.

The growing discontent comes less than three months ahead of crucial parliamentary elections slated for March 14.

Hard-line conservatives gained control of the parliament in the February 2004 elections after the country's constitutional watchdog barred thousands of reformists from running. But in local municipal elections a year ago, the president's allies suffered a humiliating defeat after a majority of the seats were won by reformists and anti-Ahmadinejad conservatives.

Central Bank of Iran figures for November showed prices of basic commodities and services rising at a 19 percent while overall inflation is running at a 16.8 percent rate annually - double the pace it was when Ahmadinejad took office in 2005. But independent economists and experts put the inflation rate well above 30 percent.

No official figures are available for specific items but over the past month, the price of basic commodities has clearly jumped in many places. In some shops visited by an Associated Press reporter in the capital, Tehran, about 2 pounds of chicken has increased 35 percent to $2.44, and rice is up 43 percent at about $2.12 for 2 pounds.

Prices for fruit and vegetables have almost tripled in the past year in many shops, and housing prices in many neighborhoods have more than doubled since last summer.

Hossein Alavi, a Tehran real estate agent, said he is selling houses at more than twice the price he asked for last year.

A prominent economist, Mohammad Sattarifar, said Ahmadinejad is to blame for flooding the market with too many newly printed bank notes, relying too much on imported goods - including basic commodities - and using oil revenues to pay for the government's day-to-day expenses instead of distributing it to the people as he promised to do in his election campaign.

Sattarifar said the government increased liquidity, or the amount of money in circulation, from $72.3 billion in 2004 to $148.9 billion this year. Economist Morteza Allahdad said this amount was a "huge, unusual increase in liquidity that has led to high inflation. Ahmadinejad can't escape responsibility for this."

Even one prominent Ahmadinejad ally, Mohammad Reza Bahonar, reversed his usual strong support for the government and acknowledged that the president has made mistakes. Bahonar, a top behind-the-scenes hard-liner, is believed to have been a key engineer of the election campaign that brought Ahmadinejad to power.

"Inflation is a reality. If a fundamental solution is not found, we are going to see harder days in the next two or three months," Bahonar, who is the deputy parliamentary speaker, was quoted in several newspapers as saying. "Increase in liquidity was among the government's mistakes. This has happened in the past two years."

Former President Akbar Hashemi Rafsanjani, a powerful figure in Iran's clerical leadership, warned Ahmadinejad on Friday that he needs to speak less and do more for his country.

"Inflation won't be resolved through slogans and political manipulation," Rafsanjani said.

Mohammad Bagher Qalibaf, the conservative mayor of Tehran, blamed the economic woes on Ahmadinejad's "mismanagement" of the country. Qalibaf said there was inflation when crude oil was sold at $10 a barrel but inflation has increased even now that oil prices are near $100 per barrel.

Mohsen Rezaei, the conservative former commander of the elite Revolutionary Guards, said the injection of huge amounts of liquidity was the main cause of increase in prices.

"The source of inflation is the government itself. It needs to rectify its economic behavior in order to control inflation," Rezaei said in remarks published Sunday.

Allahdad agreed, saying the unusual increase in liquidity led to a rise in prices and economic hardship for many.

"The intention was to improve the economy but it backfired because the government ignored expert views," he said.