Monday 19th Aug 2019 

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News: Iran Economy

Iran Regime’s Band – Aid Solutions Deteriorates Economic Crisis

Iran Regime’s Band – Aid Solutions Deteriorates Economic Crisis

By Shahriar Kia

Under a development plan, Iran had planned to change its banking system and work on changing monetary policies. The Rouhani administration wanted to change the country’s national currency from the Rial to the Toman a few years ago. However, the administration put these plans to change the national currency on hold because of the economic uncertainty at that time.

Changing the currency from the Rial to the Toman would eliminate some of the zeros that complicate calculations. Taking some of the zeros away, however, will not improve the purchasing power of the people. It will help with the everyday exchange of money and it would go some way towards fighting against the recent sharp devaluation of the Rial.

Inflation, supply and demand, job creation, investments and economic indices would also not be impacted by such modifications.

Currency reconversion must be undertaken very carefully and a number of factors should already be present before such a major process is started. Single-digit inflation is something that should be present. As is economic stability. Neither of these factors are in any way present in Iran.

The Iranian government is attempting to control liquidity and money volume. Mohammad Reza Sabzalipour, an Iranian economist, explained that the government is trying to resolve several problems at the same time.

“It seeks to control money and liquidity volume in the society i.e. cutting four zeroes would change the present 17 quadrillion rials (about $404 billion) of liquidity down to 1.7 trillion rials (about $40.4 million) overnight, but the zeroes will incrementally come back and liquidity will be increased over time, in case CBI [Central bank of Iran] continues printing fiat money.”

The Iranian regime is falling into the trap of taking measure that will initially bring some sort of appeasement to the people, but it essentially would be a cosmetic action that would appear to decrease the cost of goods and services. It is something that will very quickly be found to be nothing more than a political move. Not an economic one.

The conditions were not right in 2016 when it was rejected. The conditions are even worse now – a reason for it to be denied once again.

Poverty in the country is an increasing issue. People are losing their life savings and more and more people are being made unemployed because of the poor economic conditions. An increasing number of people are falling into the absolute poverty category.

The economic sanctions that were put back in place by the Trump administration have had an effect on this, but it must not be forgotten that the Iranian regime’s corruption and mismanagement is what sparked this all off. The Iranian regime made the decision to neglect the people at home in favour of meddling abroad.

The people of Iran took their future into their own hands over a year ago when they decided to initiate protests and anti-government demonstrations. They have been keeping up the momentum and there is no doubt that they will be the driving force behind the regime change that will change the dynamics of the region for the better.

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