As the new government of Iran’s regime prepares to take office, the living conditions of the Iranian people continue to decline. We are witnessing a significant increase in the prices of essential goods, indicating the worsening of the regime’s economic disease. So much so that 50 members of the parliament have protested in a letter against the removal of the 280,500-rial-to-dollar exchange rate for 485 essential items.
On July 19, the state-run Bahar News website wrote, “In fact, this action by the government has caused the prices of essential goods in the country to increase by more than 50 percent.”
What will Be the future of Iran’s economy
The economic mega-crisis is more complex and problematic than the skyrocketing food prices and rampant inflation targeting the empty tables of the people. The vital and forward-looking question is: what will be the fate of over 80 million Iranians?
On July 18, Tejarat News website quoted economic expert Hossein Raghfar on roots of the economic crisis and Iran’s future: “Crony capitalism is a significant indicator of the current situation. It means a group with political or family connections runs the country’s economy.”
A clear example is a shadow family that, within two years (2021 and 2022), received 5 billion dollars in foreign exchange, mainly at the 42,000-rial rate, and imported a basic food commodity that could have been produced domestically. None of the three government branches pursued this issue. These families and mafia gangs “divide the resources among themselves, and the distribution of opportunities and resources benefits a small group connected to power in the country. The governing institutions have created an absolute monopoly in the economy.”
As a result, “this economy certainly has no future and will undoubtedly collapse sooner or later.” Another example is the “national disaster” in the transportation sector, which we all witness. Oil money is spent on importing Chinese cars that line up like trains in the streets, allowing a few to pocket billions in profits.”
Interestingly, Raghfar questions whether these people are even Iranian: “Because national interests have been the first victim of these policies,” and he answers himself, stating that the main factor behind this situation is “the governance system or, in other words, the fundamental decision-making system, which certainly leads us to the lowest points.” This means “economic collapse,” a situation that has been unfolding over the past few years.
On July 19, Fararu news website quoted Economist Morteza Afghah about the country’s economic reserves, as saying, “We are now in a situation where I even doubt that the Foreign Exchange Development Fund has much left in its arsenal or that the government has any significant reserves to sell.”
Global warning to Iran’s economy
The not-so-distant future of Iran’s struggling economy has been clearly outlined by the World Bank and the International Monetary Fund. These two international monitoring bodies have warned that the country’s GDP growth path will be influenced by various factors, particularly the stagnation of the oil sector, and will decline. Iran’s GDP growth this year will decrease by 1.3 percentage points from 2023 to 3.3 percent It is estimated that Iran’s economic growth will further decline to 3.1 percent in 2025.
Worse still, the growth rate of gross fixed capital formation will be declining, falling from 5.9 percent last year to 4.4 percent this year and to 4.2 percent and 3.1 percent over the next two years.
The root of the ruin
Recently, two senior economists in the regime again pointed out the critical economic situation but attributed the remedy for this pain to political governance, though they have no hope for it.
On June 24, the state-run Sazandegi newspaper wrote, “Two prominent economists, Hassan Derakhshan and Massoud Nili have warned about the additional pressure exerted by politics on the economy and expressed concern about the future of Iran’s economy. They believe political reforms precede economic reforms. The precondition for any reform action in Iran’s economy is changing the policymakers’ mental paradigms and erroneous beliefs. Even if the most suitable presidential candidate can repeat their campaign slogans within the limited scope of the executive branch for a short while, sooner or later, the obstacles and disruptions resulting from political structures will bring them down.”