TEHRAN, Iran, Aug.10
Trend:
Iran's inflation rate is predicted to increase to more than 50 percent in the current Iranian year (started March 21,2021), economic expert and former managing director of Saderat Bank Ahmad Hatami Yazi told Trend.
"Some are asking if the new government will be able to do something about this, and I can say that the current conditions prevent President Raisi and his staff to control the inflation," he said.
"There are three elements that like a chain are connected and would prevent any positive changes in economy. These three elements are budget deficit, increase of inflation and liquidity," he said.
"The new government will also have budget deficit in the current Iranian year. Salaries, pensions and the pension fund - all this must be taken into account. Maybe the government could reduce the construction budget and ignore certain infrastructure projects. This would cut off some investments into the country, but on the other hand, the government can't ignore pensions and salaries," said Yazi.
"The government has income from oil and gas, property sales, customs and taxes. Oil and gas exports have been crippled by sanctions. Following the recession caused by lack of foreign currency revenues, factories shut down and businessmen didn't have any profits, so no taxes could be paid. Since import and export have declined, this affected the customs revenues as well," he explained.
"In this situation the government has to print money that means increase of liquidity. This means the government would give purchasing power to the people, but the latter wouldn't have commodity and services to pay for, so in this situation inflation is inevitable," Yazi said.
He noted that the solution to give a breath of fresh air to Iran's economy is reaching an agreement within the JCPOA, as well as provide way for oil and gas sales, and have normal banking transactions.
"The JCPOA agreement is more important than people's purchasing power," he said.