TEHRAN - While President Mahmud
Ahmadinejad is busy running a high-voltage
campaign against the United States and its
policies, Iranians are wondering whether he will
ever make good on election promises to crack down
on corruption 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," said a a 67-year-old
pensioner who asked to remain anonymous. "I'm
running a family of three on less than US$220 a
month and the price of the cheapest cut of meat is
$6 per kilogram. Thank God I'm not paying rent or
we wouldn't have anything to eat."
A
political analyst in Tehran said: "Dissatisfaction
with the administration of President Ahmadinejad
is not yet widespread, but it is growing fast. The
hardline government that outran reformists on a
plank to check inflation, lift living standards,
create employment, and take a bite out of 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."
He said: "Iran is the
30th-largest economy in 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 Organization figures, 30% of the
population is still living under the poverty line.
The top 20% of the population is holding 50% of
the national income and 80% of the total wealth,
so it's quite natural that economic improvement
means a great deal to the president's most ardent
supporters, the impoverished.
"Results of
an opinion poll reported by Mehr News Agency in
September show that in May, 61% of those asked
found his team successful in the nuclear issue,
44% in managing inflation and only 37% in fighting
corruption.
"The report doesn't mention
percentages but says those asked consider
unemployment and inflation the administration's
most urgent problems. It seems Ahmadinejad has
concentrated his efforts more in foreign policy
rather than in the more challenging economic
arena."
The analyst continued: "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."
Fourteen months ago
when Ahmadinejad took office he talked of "taking
oil revenues to people's dinner tables", charging
that governments run by his predecessors had
ignored poverty and 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%
now, and is forecast to rise to 14% or 15%. There
is a huge budget deficit, amounting to $8 billion.
Even Iran's top judiciary has warned about capital
drain. The highly subsidized,
oil-revenue-dependent Iranian economy is
struggling with inflationary stagnation, they
believe.
"It's still too early to make a
good assessment of the government's economic
performance, but some of the contradictions
resulting from lack of a clear economic theory are
already becoming evident," said Saeed Leylaz, an
economic analyst in Tehran.
"Single-digit
interest and inflation rates that Ahmadinejad
promised to achieve quickly [are] one example.
They can't be both achieved at the same time.
Lower interest rates meant to bring growth to the
national economy can in countries like Iran and
the US lead to higher inflation. In our case, the
economic growth rate wasn't accelerated by
lowering interest rates and when prices started to
go up, the panicky government had to back down and
resort to controlling and manipulating prices,"
said Leylaz.
"Moreover, the government
sector is growing fast and the private sector is
losing ground. The government 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."
Leylaz added:
"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."
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 around $50
billion worth of subsidies this year," Leylaz
said. "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.
"The populist government believes in
paying subsidies to overcome poverty and
deprivation, but [it] should try instead to
achieve economic growth and create jobs," he said.
Parliament closed the budget on oil
revenues of $40 per barrel for the current Iranian
year (March 21, 2006, to March 20, 2007). The high
oil prices, up to more than $50 per barrel and
even topping the $70 mark for a while from about
$8 per barrel in 1998, have given the hardline
government courage to spend, economists say. The
extra money is supposed to go to the Oil
Stabilization Fund, set up by the reformist
government a few years ago.
Just 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 until March, and
there is a danger the fund will run dry by then,"
said a political observer who asked not to be
named. Leylaz said: "The government drew five
times more from the Oil Stabilization Fund than
the same period last year in the first five months
of this year [beginning March 21], but you can't
see any growth. Parliament is not politically
strong enough to stop the government and will give
it the go-ahead.
"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," he said.
The
political observer said: "Oil revenues are used to
import things to control inflation. Imports are
expected to amount to $60 billion this year. Apart
from items like meat and fruits, lowered tariffs
are being applied to the import of construction
material like cement and steel, too, to bring down
the soaring real-estate prices and rent. But even
so, the government has not yet been able to lower
inflation. Even hardline members of parliament
[MPs] and the hardline Keyhan newspaper are now
crying out against rising prices.
"Ahmad
Tavakkoli and Mahmoud Khoshchehreh, both hardline
MPs and former Ahmadinejad allies, have now turned
into government critics," he said. "They, too, are
accusing the government of following a populist
approach.
"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."
