In Iran, Hopes Fade for Surge in the Economy
TEHRAN — Suffering in
an economy dragged down by years of mismanagement and the effects of
international sanctions, Iran’s increasingly impoverished middle class voted in
huge numbers last summer for President Hassan Rouhani, who promised to reignite
growth by restoring ties with the rest of the world.
But more than six
months after Mr. Rouhani took office, hopes of a quick economic recovery are
fading among ordinary Iranians, business owners and investors, while economists
say the government is running out of cash.
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Although Mr. Rouhani
has managed to stabilize the national currency, halt inflation and forge a
temporary nuclear deal that provides some relief from sanctions, delivering on
his promises of economic growth has proved far more difficult. On taking
office, he discovered that the government’s finances were in far worse
condition than his predecessor, Mahmoud Ahmadinejad, had ever let on. Now, with a lack of petrodollars and
declining tax revenues, Mr. Rouhani has little option but to take steps that in
the short-run will only increase the pain for the voters who put him into
office.
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With the start of the
Iranian new year, on Friday, the government will begin phasing out subsidies on
energy, the start of a process that will send the prices of gasoline and electricity,
and other utilities, soaring by nearly 90 percent, economists say.
The shortage of funds is also forcing the government to wind
down a system of $12 monthly payments to nearly 60 million Iranians, with only
the poorest eligible to reapply.
In return, Mr. Rouhani’s government can promise only a
reduction in the inflation rate to 25 percent next year, from 42 percent last
year and 32 percent currently.
That was hardly the payoff that Farshid Farshi, a sketch
artist, was expecting when he voted for Mr. Rouhani in June. Mr. Farshi and his
wife, a hairdresser, gathered up the head scarves they were selling illegally
in one of Tehran’s central squares, Haft-e-Tir, recently, having spied the
police up the road.
Business was bad anyway, he complained, tying up his
merchandise in a bundle on the back of their motorcycle. The couple’s only
daughter was hoping for a piano for her birthday, Mr. Farshi said. “But for now I only work more and more and
have less and less. This seems to be our fate.”
Most people fear that prices will shoot up when subsidies
are cut in the new year. “Already nobody
is coming to the beauty salon” where she used to work, Mr. Farshi’s wife said,
adding that she had been unemployed for the past year. “They are blow-drying
their hair at home because they can’t afford to pay for it any longer.”
Close to the Farshis sat a farmer from eastern Iran, selling
Tupperware containers, and a nurse selling electronic cigarettes and hair
glitter. “Normally, we wouldn’t sell
things on the streets, but we all have to make extra money,” said Mr. Farshi,
adding that he also earns some money making black-and-white sketches of
international celebrities like Leonardo DiCaprio and Albert Einstein.
Iran’s stock market, which rode high on optimism injected by
the new government and the temporary nuclear deal, has been in decline, losing
14 percent since its peak in December.
The national currency, the rial, after months of stability, has dropped about 4
percent against the dollar in the last month, to just over 30,000 rials to the
dollar on the black market.
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For the first time
since the elections, the government was forced to sell dollars on the open
market this month to support the rial, insiders say. Government spokesmen,
trying to play down the significance of the rial’s fall, say the decline in the
currency’s value is the result of a seasonal rise in demand for foreign
currency tied to the New Year holiday.
Photo
An employee at a hydroelectric plant in Mazandaran Province.
The price of gas, electricity and other utilities could rise by 90 percent,
officials say. Credit Abedin Taherkenareh/European Pressphoto Agency
Others are saying the markets are losing faith in the
government’s ability to get the economy going. “We are once again witnessing investors taking their money out of stocks
and instead speculating on gold
and foreign
currency,” one stock market expert, Hamid Mirmouni, told the Fararu website
recently. “The government continues to waste time and money, investors are
losing hope.”
Adding to the turmoil are the subsidy cuts — a step that
most economists say is inevitable and necessary. Earlier, when gas prices were
raised and rations imposed in 2007, protesters set fire to more than a dozen
gas stations. The last time fuel subsidies were cut, in 2010, gasoline prices
nearly quadrupled in Tehran.
Even those close to the Rouhani administration are saying
they are hoping for a “miracle” to avoid the political damage from the cuts.
“We are facing a black spring in Iran,” said Saeed Laylaz, an economist who
advises Mr. Rouhani. He said he feared
the government, like the Ahmadinejad administration, would resort to printing
money to paper over the budget deficit, threatening a rise in inflation. “I am
worried we might witness turmoil,” he said.
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Recent Comments
David
22 March 2014
Meanwhile, on the same page of the Times, there's a story of
Iran wasting huge amounts of money building a bizarre, cargo-cult-like
replica...
Lawrence
22 March 2014
The former Soviet
Union squandered much of its wealth on "wars of liberation" while the
living conditions at home became worse and worse.the...
Bill
21 March 2014
No real hope for Iran as long as the hard liners remain in
conrol. A revolution does not seem likely at the moment so Iran may slip
along...
See All Comments
Iran’s supreme
leader, Ayatollah Ali Khamenei, echoed such worries in a speech Tuesday to
dozens of the country’s most influential leaders, politicians, clerics and
military commanders. He urged the government to pay attention to the poor,
calling for social justice, meaning an equal distribution of wealth.
“The Islamic system
does not accept economic growth without social justice,” Ayatollah Khamenei
said. “Any progress in the country’s economy must improve the situation of
the, in the true sense of the word, deprived sectors of the population.”
While Mr. Rouhani is
counting on improved international relations and the trade that might come of
it to lift the economy, Ayatollah Khamenei has designed a parallel economic
plan based mainly on self-sufficiency. In what he calls a “resistance economy,”
the country would mostly rely on itself, striving for near self-sufficiency in
“strategic and primary items,” the supreme leader said this week.
Dismissing skeptics, the ayatollah said, “The resistance
economy will lead to welfare and improving the condition of the life of all of
the people, especially the poor.”
One Tehran-based analyst, who spoke on the condition of
anonymity to discuss the economic problems openly, said that over the past
decades many different governments had tried to fix the economy, but all had
found it politically difficult, if not impossible.
“Many of our problems
are systemic,” he said. “There is no real solution other than muddling on.”
Back at the Haft-e-Tir square in central Tehran, the street
vendors complained that nobody was buying. “I work as a nurse,” said a
27-year-old woman who would give only her first name, Fatima. “I’d rather make my money in a hospital,
but it’s not enough,” she said, looking left and right for plainclothes police
officers.
Mr. Laylaz, the economist, said that all the promises made
by Mr. Rouhani were realistic, but that “real action” was needed. “We should completely liberalize our
economy; there is no other choice,” he argued. “We need to attract
investors at any costs. Our option is probable death, or certain death.”
1.
Suffering in an economy dragged down by years of
mismanagement and the effects of international sanctions, Iran’s increasingly
impoverished middle class voted in huge numbers last summer for President
Hassan Rouhani, who promised to reignite growth by restoring ties with the rest
of the world. (SIMPLE PAST)
2.
But more than six months after Mr. Rouhani took
office, hopes of a quick economic recovery are fading among ordinary Iranians,
business owners and investors, while economists say the government is running
out of cash. (SIMPLE PRESENT)
3.
Iranian Ship, in Plain View but Shrouded in
Mystery, Looks Very Familiar to U.S.MARCH 20, 2014 (SIMPLE PAST)
4.
Although Mr. Rouhani has managed to stabilize
the national currency, halt inflation and forge a temporary nuclear deal that
provides some relief from sanctions, delivering on his promises of economic
growth has proved far more difficult.(SIMPLE
PERFECT)
5.
Now, with a lack of petrodollars and declining
tax revenues, Mr. Rouhani has little option but to take steps that in the
short-run will only increase the pain for the voters who put him into office.(PRESENT PROGRESSIVE)
6.
With the start of the Iranian new year, on
Friday, the government will begin phasing out subsidies on energy, the start of
a process that will send the prices of gasoline and electricity, and other
utilities, soaring by nearly 90 percent, economists say. (SIMPLE PRESENT)
7.
But for now I only work more and more and have
less and less.(PRESENT PROGRESSIVE)
8.
“Already nobody is coming to the beauty salon”
where she used to work, Mr. Farshi’s wife said (SIMPLE PAST)
9.
. “Normally,
we wouldn’t sell things on the streets, but we all have to make extra money,”
said Mr. Farshi. (SIMPLE PAST)
10.
. The national currency, the rial, after months
of stability, has dropped about 4 percent against the dollar in the last month,
to just over 30,000 rials to the dollar on the black market.(PRESENT PERFECT)
11.
For the first time since the elections, the
government was forced to sell dollars on the open market this month to support
the rial, insiders say.(PRESENT PERFECT)
12.
We are once again witnessing investors taking
their money out of stocks and instead speculating on gold and foreign
currency,” one stock market expert, Hamid Mirmouni, told the Fararu website
recently (SIMPLE PRESENT)
13.
He said he feared the government, like the
Ahmadinejad administration, would resort to printing money to paper over the
budget deficit, threatening a rise in inflation. “I am worried we might witness
turmoil,” he said.(SIMPLE PAST)
14.
Iran’s supreme leader, Ayatollah Ali Khamenei,
echoed such worries in a speech Tuesday to dozens of the country’s most
influential leaders, politicians, clerics and military commanders. (SIMPLE PAST)
15.
“The Islamic system does not accept economic
growth without social justice,” Ayatollah Khamenei said. (SIMPLE PAST)
16.
While Mr. Rouhani is counting on improved
international relations and the trade that might come of it to lift the
economy, Ayatollah Khamenei has designed a parallel economic plan based mainly
on self-sufficiency. In what he calls a “resistance economy,” the country would
mostly rely on itself, striving for near self-sufficiency in “strategic and
primary items,” the supreme leader said this week. (SIMPLE PAST)
17.
“Many of our problems are systemic,” he said.
“There is no real solution other than muddling on.” (SIMPLE PAST)
18.
The former Soviet Union squandered much of its
wealth on "wars of liberation" while the living conditions at home
became worse and worse.(PRESENT
CONTINOUS)
19.
. “I’d rather make my money in a hospital, but
it’s not enough,” she said, looking left and right for plainclothes police
officers. (SIMPLE PAST)
20.
. “We should completely liberalize our economy;
there is no other choice,” he argued. (SIMPLE
PAST)
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