The Forum for Partners in Iran's Marketplace

October 2021, No. 98


6 Main Problems of Raisi Administration!

At present, 6 issues have caused economic growth not to occur, inflation to increase in the economy, and welfare support not to be applied properly.

Dr. Masoud Nili, Economist

President-elect Ibrahim Raisi recently invited a group of economic experts for an exchange of views and consultation. Masoud Nili was one of the economists invited to the meeting. Nili, referred to four essential steps the incoming government must take in properly dealing with the economic problems.  Nili said the first step to be taken by the Raisi administration was identification of the problem statement . According to the economist, in this direction, six major problems of Iranís economy will be identified, which are: ďfinancingĒ, ďenergy supplyĒ, ďnatural resources and environmentĒ, ďpublic service deliveryĒ, ďimplementation of supportive policiesĒ and ďexchange system with other countriesĒ. Nili also addressed the misconceptions about liquidity management and stressed the need for the sanctions to be lifted. According to him, a country under sanctions cannot think about investment and economic prosperity.

According to Nili, what distinguishes different politicians from one another is not their stated goals. High economic growth, reducing inflation, increasing employment and improving poverty are the stated goals of all politicians, but the main difference between politicians is the policy tools they choose to achieve these goals. Among the current issues, one should look out for 6 vital pillars of the economy; ďFinancingĒ, ďEnergy SupplyĒ, ďNatural Resources and EnvironmentĒ, ďPublic Service DeliveryĒ, ďSupportive PoliciesĒ and ďExchange with Other CountriesĒ are the main pillars. Therefore, in the first step, the incoming chief executive must be able to identify the main priorities of the economy with a comprehensive point of view. This is the starting point for the distinction between politicians.

In my opinion, at present, 6 issues have caused economic growth not to occur, inflation to increase in the economy, and welfare support not to be applied properly. 

The first issue is financing. No activity takes place in the economy unless it is financed. Financing is no longer an issue anywhere in the world and has become an almost resolved. Some economic entities save money and financial institutions allocate these savings to economic activities. This credit allocation also comes at a price, and different economic activities can be financed at different prices. Of course, in many countries around the world today, there is institutional facilitation in this field and businesses can be financed at a relatively cheap price. We are one of the few countries in the world where financing is one of the main obstacles to economic growth. Financing is one of the most important issues in the country, but the financing institutions in our country are in trouble and these institutions themselves have been in need of financial resources for a long time. While the provision of corporate resources must be done through banks, the banks themselves need resources and use the resources of the central bank to cover their deficit.

The second most important issue we face these days is energy supply. Like the issue of financing, the issue of energy supply has been resolved in the world; even countries with limited energy resources are no longer struggling with energy supply. Our country, which has a lot of energy resources, is facing many problems in the field of energy supply. It is very strange that a country that is at a desirable level in terms of underground resources in the world, ranking first in gas reserves and fourth in oil reserves, is desperate for energy supply. The country, rich in gas reserves, is unable to meet its gas needs in winter and has difficulty generating electricity in summer. This is in a situation where even energy exports are insignificant, and yet the country still has problems in supplying energy. This is one of the paradoxical and important issues. In the energy debate, what is being said is that the resources needed for investment must be provided. So the way to improve in this area is the issue of resources.

The third issue is the provision of public services. The main task of governments is to provide public services. Providing security, appropriate educational services and health services is one of the responsibilities of governments. We also face a lot of serious shortcomings in this respect. If the government is asked why the country is facing problem in the field of health and security education, it will answer that it has a problem of lack of resources and a problem of budget deficit; That is, here again there is the problem of lack of resources.

The fourth issue is the issue of environment and nature. It should be noted that every activity carried out in the economy has a channel of communication with nature (soil, water and climate). Many productive activities depend on water, agriculture is related to soil, and air is related to peopleís lives. In general, we are facing a crisis in environmental issues. Water crisis, soil crisis and air pollution in some seasons of the year continue to be a problem for the country. Of course, this year, due to low rainfall, the water crisis has become serious. In these areas, too, the problem of lack of resources for investment is serious.

The fifth issue is the governmentís protectionist policies. Every system of government, if it wants to be sustainable, must have mechanisms to combat poverty and must not be indifferent. In the last 10 years, our economic growth has been close to zero. Lack of economic growth means that nothing has been added to our income. This is while about 12 million people have been added to the population of the country, that is, 12 million people have been added to those sitting around the table, while the amount of food on the table has not changed; This means that the level of per capita income has decreased. Of course, when it is said that per capita income has decreased, income has not decreased to the same extent for all sections, and some of the weak sections of society have suffered more than others. There are ways to eradicate poverty in society. The policymaker can define an income floor so that anyone with less than that income can be supported by the government. If this policy is not implemented, the depth of poverty in the country will increase day by day. Many examples of poverty can be seen in cyberspace, the environment and even everywhere in Tehran. A society in which poverty has no fixed floor cannot be sustained. This issue also requires resources. Social Security, the Relief and Welfare Committee all need resources, and without resources they cannot provide as much as they should. In addition to helping to alleviate poverty and in-generation support, assistance to retirees and in-generation support should also be considered. Meanwhile, pension funds are also facing resource shortage problems.

The sixth and final issue is trade with other countries. There is no government in the world that can run the country in isolation. Even if we ignore the issue of capital inflows and outflows, the main issue in relation to other countries is the system of exchange and facilitation of exports and imports. Effective communication with other countries provides the opportunity to prepare the basket needed by the economy in the cheapest way. Goods that are produced domestically at higher prices can be imported; on the other hand, goods we produce domestically at lower costs can be exported. This will increase the welfare of the society.

Today we see that various wounds have been opened up and the work of governance is limited to providing relief. At the same time, the root causes of the problem are worsening every day, and crises are coming one after another. Problems are usually economic in nature in the first stage, and the symptoms that appear are economic. For example, the expert system recognizes that the amount of resource consumption is more than the amount that enters the aquifers. It issues warning and offers solutions. We do not pay attention and pass this stage and enter the social stage. People are migrating, addiction and crime are increasing. Again, nothing happens. In the next stage, the problem enters the political phase. Dissatisfaction spreads and the system of governance is under threat. It is at this point that confrontation ensues and the crisis assume security shape. The unfortunate thing is that as you go through each step, the solutions of the previous step will no longer work or will be very ineffective. Today, we see that many of the countryís problems have unfortunately entered the final phase. Note that when the system of government enters the final phase, it no longer has the social capital with which it can solve the roots of problems through economic reform. Thus, it itself becomes an effective element in exacerbating imbalances and worsening conditions.


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