While President Mahmud Ahmadinejad is busy running a high-voltage campaign against the United States and its policies, back home citizens are wondering if he will ever make good on an election promise to crack down on the corrupt and distribute Iran’s vast oil revenues more equitably.
”My whole family voted for Ahmadinejad because he promised to improve our lives. He said he was going to fight corruption and create jobs. He said oil money belonged to the people. I haven’t seen any of the oil money in my house yet, but I have to deal with the ever-increasing prices anyway,” says Ahmad*, a 67-year-old pensioner. ”I’m running a family of three on two million rials [less than $220] a month and the price of the cheapest cut of meat is $6 a kg. Thank God I’m not paying rent or we wouldn’t have anything to eat.”
”Dissatisfaction with the administration of Ahmadinejad is not yet widespread, but it is growing fast,” said a political analyst in Tehran. ”The hardline government that outran reformists on a plank to check inflation, uplift living standards, create employment, and take the bite from the corrupt and the rich and give it to the impoverished, has not only failed to deliver those promises, but has clearly moved in the opposite direction in economic experts’ view.”
”Iran is the 30th largest economy of the world. The per capita income in 2006 is estimated to rise to $3 465 or $700 more than the previous year. But according to Social Security Organisation figures, 30% of the population is still living under poverty line. The top 20% of the population is holding 50% of the national income and 80% of the total wealth,” the analyst said.
”His administration seems to have failed for the time being to deliver the economic promises abundantly made at election time and the results of wrong and hasty economic decisions, like forcing government and private banks to lower their interest rates, are now beginning to show in people’s reluctance to make long-term deposits in banks, for example,” he said.
Fourteen months ago when Ahmadinejad took office he talked of ”taking oil revenues to people’s dinner tables”, charging that previous governments had ignored the poor, something his team would remedy.
Economic indicators now show a huge decrease in the stock market value and private banks claim they are on the brink of bankruptcy resulting from lowered interest rates. The inflation rate is said to be just above 12%, and is forecast to rise to 14% or 15%. There is a huge budget deficit, amounting to $8-billion. The highly subsidised, oil revenue-dependent economy is struggling with inflationary stagnation, economists believe.
”The government sector is growing fast and the private sector is losing ground,” said Saeed Leylaz, economic analyst in Tehran. ”It has been granting huge contracts by the order of the president and without holding tenders to military bodies. The Islamic Revolutionary Guards Corps has over the past few months been granted $8-billion worth of government contracts alone,” he said.
”On the other hand, the government’s slogans and its domestic and foreign policies have scared away investment. The stock market has lost 50% of its total value compared to its peak time,” Leylaz added.
The huge amount of subsidies paid by the government is widening the gap between the rich and the poor, economists warn. ”The Iranian economy will be injected with about $50-billion worth of subsidies this year. But it will do little to help the poor. Fuel subsidies comprise one-third of the total subsidies paid by the government and more than half the fuel subsidies, for example, will find their way into the pockets of the top 10% of the population who have and use cars, meaning that the top 10% are getting one-sixth of all subsidies.”
Parliament closed the budget on oil revenues of $40 per barrel for the current financial year. The high oil prices, up to more than $50 a barrel and even topping the $70 mark for a while from about $8 a barrel in 1998, has given the hardline government courage to spend, economists say. The extra money is supposed to go to the Oil Stabilisation Fund, set up by the reformist government a few years ago.
Only to pay fuel subsidies in the first half of the current Iranian year, the government has drawn $2,5-billion from the fund and is seeking the approval of Parliament for $3,5-billion more for the next six months. ”The government is expected to draw a total of at least $14-billion till March and there is a danger the fund will run dry by then,” said a political observer who asked not to be named.
”We are now five times more dependent on oil revenues than we were in 1998. The real results of what is being done now will become only too evident in 2008. The government will have enough forex resources to mask its mismanagement,” Leylaz said.
”There may come a time when the Islamic Republic may not be able to cope with the highly increased expectations it originally created, the dismal outcome of which will be political upheaval,” he added. — IPS