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January 2019, No. 90


Cover Story

Iran Today Economic Emergencies


The growth of an efficient private sector, promoting the business environment and ensuring stability in decision-making were among suggestions made to come out of these conditions.


Masoud Khansari,
Chairman of TCCIMA

Private sector activists have announced the emergencies of the Iranian economy. According to them, the current state of the economy is such that the siege gets tighter every day. In these circumstances, it is necessary to put emergency measures on the agenda in a number of sectors. Among these emergencies mention can be made of urgent decisions on the rates of energy carriers, exchange rate arrangements, and the creation of non-banking channels with trade partners considering the conditions of our banks under the new US sanctions, improvement of the business environment and creating stability in decision-makings.

Representatives of the private sector in a closed session once again cited the current economic challenges. They believe that the siege of the economy is getting tighter everyday due to international developments, the most important of which are the second-round of the US sanctions, and internal constraints. Hence, members of the Tehran Chamber of Commerce, Industries, Mines and Agriculture (TCCIMA) raised a series of economic emergencies and some suggestions were also made. One of the most important issues raised at the meeting was energy subsidies. Considering a recent report by the Majlis Research Center (MRC) on petrol consumption, it was agreed that immediate decision must be taken in this regard.

The TCCIMA has also prepared a plan for allocation of subsidies to gasoline, which would fetch more than 30,000 billion rials annually. Another issue discussed at the meeting was the difficult situation Iranian banks were facing as a result of the new US sanctions. To handle this problem, it was proposed that the Iranian side hold negotiations with Iran’s trading partners to create non-banking channels. The idea of foreign exchange commitment by exporters was also criticized although in another meeting of economic activists with the governor of the Central Bank of Iran and officials from the Ministry of Industry, Mine and Trade, the activists lessened the severity of their criticisms.

The foreign exchange fluctuations that resulted from the creation of five different rates for the exchange were also the subject of criticism from economic actors. In this regard, the private sector is demanding a single currency exchange rate. This issue had been previously mentioned by the Minister of Economy Farhad Dejpasand at a meeting of the Government and Private Sector Dialogue Council and the minister had given the green light to the floating exchange rate system. Economic activists also emphasized the creation of this system at the meeting. The deterioration of the status of industrial enterprises was also another warning given by private sector craftsmen. They said some firms are shutting down, and some others have moved to other countries.

The growth of an efficient private sector, promoting the business environment and ensuring stability in decision-making were among suggestions made to come out of these conditions. Of course, the economic activists also raised a number of complaints, including the negative effects of banking sanctions on the drug industry, creating commotion in the economy through the government’s daily decisions, and the difficulty in supplying raw materials to the auto industry.

Masoud Khansari, Chairman of the TCCIMA, said at the meeting that the current situation in the Iranian economy is such that the siege gets tighter every day. He said recession and unemployment are also growing. “Despite these pressures, the more we move towards internal cohesion, the less damage we will suffer.”

According to Khansari one of the great weaknesses in facing the current situation is the lack of decision making or taking late decisions. He added that the price of energy carriers should be decided as soon as possible. According to a recent report released by the MRC, 200,000 to 210,000 billion rials of gas subsidies are allocated annually.

Introducing real prices for energy carriers is one of the issues that requires urgent decision making, Khansari said, noting: “The TCCIMA has prepared a plan on the price of gasoline and how the fuel should be supplied that is not only compatible with social justice, but also by improving the price of fuel carriers the country is expected to earn 30,000 billion rials and $3.2 billion in foreign exchange annually. The money can be spent to develop the public transportation and pay the government’s debts to private contractors.

He also called attention to the development of exports under the US sanctions “imperative” and noted: “Given the proximity of 14 countries with Iran, and considering that imports of these countries are estimated at $900 billion annually, Iran should allocate a proper share of the market in these countries. Iran’s share from the $900 billion of imports is $24 billion.

Ali Sanginian, chairman of the money and capital market commission of the TCCIMA also described the situation of the Iranian banks under the new sanctions.

 

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  January 2019
No. 90