Iran has no time to waste in reviving the economy

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The head of the planning and budget organization says the Iranian government will not wait for the Vienna negotiations to revive the economy, which is set at a growth rate of 8%.

“The goal of economic growth of 8% can be achieved on the basis of our land use planning and domestic capacities,” wrote Masoud Mirkazemi on his Twitter page on Monday.

The new government has prioritized economic growth, which has stagnated around zero in recent years. Its main goal is to control inflation and achieve economic growth of 8%.

Mirkazemi sees an economic recovery on the way as the country has overcome stagnation under the previous administration and the effects of COVID-19.

“We will not keep the country waiting for negotiations,” he said, referring to the talks that were resumed in Vienna on Monday to revive the Iranian nuclear deal of 2015 and to repeal everything imposed on the country under former US President Donald Trump Sanctions.

Mirkazemi said at a meeting with Foreign Minister Hossein Amir-Abdollahian on Tuesday that the Iranian state budget for the Persian fiscal year 1401, which ended on Jan.

“The 1401 Draft Budget was drafted on the assumption that the sanctions would continue. From the start, the government has said it has a plan for the economy and will not tie people’s livelihoods to the negotiations,” he said.

Vice-President for Parliamentary Affairs Mohammad Hosseini went even further, saying Iran would not bind the solution of its problems to membership of the Paris-based Financial Action Task Force (FATF).

The former administration was firmly in favor of joining the FATF, arguing that doing so could facilitate foreign trade with Europe and Asia and offset US sanctions. Opponents say that passing a law to join the FATF could expose Iran to even more coercive measures.

The FATF is an intergovernmental body established by the West in 1989 to allegedly combat money laundering, terrorist financing and other related threats to the integrity of the international financial system.

In the past, the US and Europeans have even tried to link the fulfillment of their obligations under the nuclear agreement with the adoption of the FATF standards by Iran, which led to a vehement rejection of the Islamic Republic.

President Joe Biden has signaled that he will rejoin the deal, but he has shown a bizarre interest in keeping the key elements of Washington’s most draconian sanctions regime intact.

“Despite the formation of a new government in the United States, not only have the illegal and unilateral sanctions remained in place, but the policy of sanctions against Iran continues,” said Amir-Abdollahian on Monday.

For the first time, a delegation appointed by the new Iranian President takes part in the negotiations. Iran has urged the US to release $ 10 billion in assets as a first goodwill gesture.

Diplomats said Washington has proposed negotiating an open-ended interim deal with Tehran pending a permanent deal. Iranian officials have made it clear that Tehran has no intention of accepting an interim agreement.

“The United States has still not fully understood that without a verifiable and effective lifting of all sanctions there is no way to revert to the agreement,” Amir-Abdollahian said in a statement shortly after the talks resumed.

The former Iranian government has used up all of its diplomatic fortune in the nuclear deal, which ruined the country’s economy miserably. The new government is entering the talks with open eyes after confirming that it will not bind the Iranian economy to the negotiation results.

According to the World Bank‘s Macro Poverty Outlook (MPO) report for spring 2021, the Iranian economy is expected to grow by 2.1 percent in the current fiscal year from March 2021 to March 2022.

Iran’s gross domestic product (GDP) is projected to grow 2.2% and 2.3% respectively through 2022 to 2024.

A strong rebound in mid-2020, the report said, resulted in modest economic expansion in 2020/2021 despite an initial COVID-19-induced shock to GDP.

The Covid-19 production loss since February 2020 has been less pronounced in Iran than in other countries, according to the report.

The new government inherited a “severe and uncontrollable inflation situation”. Consumer prices have mostly risen by double or triple digits over the past year, exacerbating Iran’s inflation problems amid a surge in global food prices amid the coronavirus.

Under the previous administration, house prices rose more than 720 percent to drive many renters into crisis as many speculators repeatedly hiked prices believing that Iranians tended to buy more when something was overvalued.

Throughout the chaos, the government remained a mere spectator, arguably out of respect for the Iranian banks, which have reportedly invested heavily in real estate in recent years.

The biggest culprit in the spiraling inflation was the insistence of the former government to print fiat money despite warnings from economists.

Traditionally, governments in Iran have balanced their budget deficits by taking over from the central bank, borrowing from the bank and printing banknotes, which has led to an increase in the monetary base and liquidity, as well as high inflation.

One of the main themes of President Ebrahim Raeisi’s election campaign was the rehabilitation of the banking system and the promotion of good governance.

His seven headed “key pledges” to revive the Iranian economy include achieving 5% economic growth excluding oil and doubling non-oil exports to $ 70 billion in four years.

He has also promised to build four million homes to ease the housing crisis, create a million jobs annually and cut inflation in half before gradually lowering it to single digits.

His other promises include providing low-interest loans to poor households in the lower half of the income distribution, increasing government subsidies to health care, and reducing household medical and health spending from 43 percent to 20 percent.

Obviously, it is a great challenge to raise enough funds to achieve these goals and to balance them so that no further inflation is created. The new government has identified government bonds and oil and tax revenues as sources to rely on to raise funds.

It specifically targets the speculative market, which the former government was reluctant to tax. Over the years, many speculators have moved to buying foreign currencies, cryptocurrencies, gold, cars, and real estate instead of investing in productive activities.

Here again comes the big task of identifying speculative activity that the former government did not make an effort. President Raeisi’s economic roadmap must also address the devaluation of the Iranian rial, which, under the supervision of its predecessor, lost 750 percent of its value, resulting in a capital outflow of approximately $ 28 billion and seriously affecting people’s lives and businesses.


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