Iran News ...


04/08/09

Curbing Inflation Top Issue in Election Race

By Arash Hassan-Nia, Tehran (Source: Mianeh)

 

The Iranian New Year, which was celebrated on March 21, was this year not just a holiday. It also served to highlight a whole host of worries about Iran's double-digit inflation.

 


Design by ISNA

 

Masoud Mirkazemi, the minister of commerce, said inflation would soon be under control. However, Iranians on the streets and in the markets did not seem convinced by his pledge.

 

"I've lived for 50 or so years, and I have never seen a drop in the prices of things which have become expensive," said a woman shopping for fruit in the Sadiqiyyeh market in the west of Tehran.

 

With presidential elections due later this year, the candidates - from President Mahmoud Ahmadinejad to his reformist opponents - all claim that lowering the inflation rate is one of their top priorities.

 

The latest report from the central bank showed that inflation in January this year was running at an annual rate of 25.9 per cent and that prices had grown 0.4 per cent from the previous month. In other words, prices are still rising - but less fast than has been the case.

 

Of course, not everyone would agree that the statistics paint an accurate picture.

 

"These official figures do not match the facts," said Behman Motlagh, a young engineer who works for a government organisation. "Someone like me who is on a fixed salary and has to make ends meet for their family's sake can sense this. I am increasingly losing my power to afford things."

 

To combat inflation, the central bank had reduced the amount of cash and credit flowing into the economy - a measure that eventually led to Tahmasb Mazaheri losing his job as chairman. The impact of this "triple-locking", as Mazaheri called it, is now clear - slower growth.

 

But his successor, Mahmoud Bahmani, says the inflation rate is also finally slowing.

 

"There will definitely be a fall in the inflation rate at the end of the year," he told the Mehr News Agency. "Given our plans to increase production and supply goods in proportion to demand, the central bank assumes that the inflation rate will return to 22 or 23 per cent."

 

Mohammad Tabibian, an economist who was director of the Supreme Banking Institute during Mohammad Khatami's presidency and in the early years of Ahmadinejad's government, says this is not surprising.

 

"A decline in the inflation rate is the result of lower prices for some goods or imported raw materials, which are cheaper as a result of the global economic crisis. Also, traditionally, inflationary pressure decreases at the beginning of winter, and this continues until the start of the last month of the year," he said.

 

Furthermore, according to targets laid out in Iran's Fourth Development Plan, inflation should drop to single digits by March 2010. But that does not seem very plausible - in the 30 years since the Islamic Revolution, inflation has fallen below 10 per cent only twice, in 1986 and 1992.

 

Inflation peaked at 49 per cent in 1995 as a result of President Akbar Hashemi Rafsanjani's economic policies. He adopted expansionist fiscal and monetary measures, liberalised imports, allowed the currency to weaken and moved towards a floating exchange rate.

 

Ahmadinejad is trying to get a bill through parliament that would reform Iran's subsidies system and make people pay more realistic prices for their power and fuel.

 

So far, parliament has refused to ratify the bill, warning that it would trigger an explosive rise in prices. According to the bill's critics, petrol prices would increase six fold; gas, water and electricity seven fold; and gasoil would be many times more expensive. Parliament has already voted for the price of petrol to remain fixed at 100 tomans (10 US cents) per litre in next year's budget.

 

News websites, such as Jumhouriyyat, have reported that the ministry of commerce has issued a directive forbidding businesses to increase prices before June - the same month as the presidential elections are to be held.

 

But even with such a directive in force - backed by the threat of severe punishment - it is hard to see the inflation rate coming down.

 

And even assuming that the promised 22 per cent inflation rate actually materialises when it is published later this year, Iran would still have one of the highest rates of inflation in the Middle East and the fourth highest in the world.

 

With the presidential elections now less than three months away, the government is struggling to win people over by bringing prices under control - as over the past three years, Iranians have become increasingly dissatisfied with both sanctions and the state-run economy.

 

Arash Hassan-Nia is a journalist in Tehran

 

This article is an abridged and translated version of the full original text published on the Farsi pages of Mianeh, with editorial adjustments agreed with the writer made to provide clarity for English-language readers.

 

About Mianeh: Mianeh is a new independent web-based initiative run as a project by the Institute for War & Peace Reporting (iwpr.net) the award-winning non-profit media development organisation that works across the globe to platform local voices and promote international learning and engagement. Mianeh aims to be an open space for ideas, news and debate where writers in Iran can reach out to each other as well as to those outside the country who are interested in learning more about the vibrant and dynamic society that is Iran today.

... Payvand News - 04/08/09 ... --



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