The most important economic decisions at that time were to fix prices (especially prices of energy carriers). Supporters of that policy maintained that it would end a chronic inflation which has been nagging the Iranian economy since many years ago. Many economists warned that inflation has other causes which are more related to monetary policies and, therefore, fixing prices cannot solve the problem. However, that policy was implemented, but it not only failed to reduce inflation, but also increased it from 10.4 percent in 2005 to 25.4 percent in 2008. The reasons was A sudden increase in illiquidity from 2004 to 2007 because when it reduced in 2008 due to economic recession, inflation rate also fell and reached 10.8 percent in 2009.

Now, the policymakers have decided to change the price of energy vectors, which is per se a good policy, though its implementation is surrounded by much controversy.

On the other hand, although job creation policies (like those which aimed to increase the number of small enterprises) increased industrial investment between 2005 and 2007, but they did not lead to economic growth and real job creation. In other words, expansionary monetary policies on the basis of unprecedented high oil prices led to a bubble in the housing sector. At the same time, economic growth rate has been falling since the second half of the Iranian year, 1386 (2007-08), and that fall still goes on.

It took more than four years for statesmen to realize that the policy to fix prices was futile. As a result of that delay in accepting that failure, huge resources were wasted, a big gap has been created between existing market prices and real ones and bridging that gap needs tremendous effort and a lot of energy. Policymakers, however, have not totally admitted the failure of expansionary financial and monetary policies and still insist that total demand should be stimulated by such policies.

A more than 30-percent increase in annual budget and the ensuing hefty deficit in government’s general expenditure is the result of inattention to experiences gained in the past four decades, especially in the past few years.