A report by the Atlantic Council, a think tank in Washington, confirmed that the biggest challenge that the new Iranian president, Ebrahim Raisi, will face in his first term is the country’s growing economic problems.
The report stated that after the United States withdrew from the Iranian nuclear agreement in 2018, the Iranian economy deteriorated during the past three years, and the GDP growth rate decreased by 6% in 2018 and 6.8% in 2019, while the inflation rate rose to 34.6% and 36.5 % in 2018 and 2019 respectively.
Much of the drop in GDP has also been linked to the massive drop in oil exports, which fell from $62.7 billion in 2018 to $29 billion in 2020. In 2020, amid the coronavirus pandemic and ongoing US sanctions, the economy struggled with a 36.5-percent high inflation rate. percent, although gross domestic product began to recover and grew by 1.5 percent two years later.
The report indicated that a major speech in his first campaign speech on May 27 focused on seven economic promises, including: giving low-interest loans to poor families, increasing government support for health care, building four million homes, creating four million jobs and prioritizing low-income people. And graduates with college degrees, rent reduced from 50% to 30%.
The report finds that these policies may look good on paper, but in fact, they are unrealistic and contradict each other, and are difficult to achieve in the near future.
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For example, the promise to build four million homes recalls a similar policy under former President Mahmoud Ahmadinejad known as the dowry housing project.
The project, which began in 2007, aimed to build 2.4 million affordable housing units for first-time homeowners. Fourteen years later, only 2.2 million homes have been built. In 2014, Hassan Rouhani’s government blamed the housing scheme as the main contributor to the country’s inflation because the Central Bank of Iran had to print more money to pay for the project.
The report stressed that it is difficult for a president to fulfill his promise to build four million additional homes during the next four years in light of this severe economic crisis.
He explained that the Iranian government needs to obtain sufficient funds from the sale of government bonds, oil revenues, or tax revenues to fulfill the said promises. It should be noted that the sale of government bonds contributes to only 15 percent of government revenue as per the March 2021 budget plan, making it an unreliable source of income to achieve Key’s ambitious goals.
He noted that while it is tempting to use oil revenues to fund these goals, especially if US sanctions are lifted as part of reviving the nuclear deal, this idea runs counter to a major endeavor to make government revenues independent of oil, and therefore, it is unlikely that he will be able to follow suit. His expansionist policies without using oil revenues.
According to the report, Raisi’s economic goals lack a detailed plan and do not address the main challenges in the Iranian economy, such as the issue of inflation, the devaluation of the Iranian currency and the foreign exchange rate market.