Three day ago, the International Monetary Fund reported about Iran’s economic situation and pointed to its “gross official reserves.”
“These reserves have fallen from $122.5 billion in 2018 to $4 billion in 2019,” wrote the state-run daily Entekhab, on April 12, 2021.
This report pictured a wider image of the tensity of the country’s economic crisis. About the gross official reserves, this report added that from 2000 to 2018 Iran had $71 billion in its reserves. This reached its highest point in 2018 with $122.5 billion but experienced an expedited fall in that period. In one year, these reserves shrank to $12.4 billion and in 2020 it fell to $4 billion.
The Iranian government has other reserves too, which of course are blocked because of the sanctions and are out of the hands of the government. These reserves reach an amount of $36 billion, and the government was expected to have access to them as a positive result of the Joint Comprehensive Plan of Action (JCPOA) negotiations.
But now the entire amount of the reserves is only $40 billion, which are accessible. The Iranian government has used more than $82 billion of these reserves for its nuclear projects and its policies in the Middle East countries while none of these policies are in the favor of the country and the people.
People’s and society’s challenges like inflation, liquidity, high prices and of course the Covid-19 vaccination are fully ignored, according to dissidents.
One of the consequences of the fall in gross official reserves for the government is an increase in the price of foreign currency inside the country, which rose from 17,000 tomans at the beginning of 2019 to 32,000 tomans and is currently in the range of 25,000 tomans.
The Central Bank governor said last year that $280 billion in foreign exchange had been injected into the market over the past 15 years. That is $18 billion a year to control a turbulent market. And of course, in return, it has imposed a flood of liquidity into this shattered economy, so that at the cost of compensating for the budget deficit of Hassan Rouhani’s government, the inflation rate reached 50-60 percent, especially for basic goods, and put the Iranian people on an empty table.
The Central Bank’s own statistics in this regard are more telling than any other analysis. Liquidity was less than 500 trillion tomans at the beginning of Rouhani’s tenure, but last year it reached 3200 trillion tomans.
“The International Monetary Fund also reports that Iran’s inflation rate was 36.5 percent last year and will reach 39 percent this year.” (State-run daily Eghtesad News, April 12, 2021)
Like any other issue when this government is facing unbelievable and shocking revelations, it begins to deny anything and this case it not an exception too. The Chairman of the Central Bank of Iran said: “As the information about these sources and their status is in the possession of the Central Bank, the statements of irresponsible people in this regard are not documented.” (State-run news agency Mehr, April 13, 2021)
Governments in Iran have always incurred huge amounts of consecutive debts by borrowing from the Central Bank and other banks in the country. According to the report, the net debt of the Iranian government from the beginning of 2000 to 2017 averaged 5.1 percent of GDP, but last year this figure peaked at 35.7 percent of GDP, equivalent to $227 billion.
If we calculate this amount of debt at the free rate of the dollar, it is six times the general budget of the government of Rouhani in 2021. Also, the existence of negative economic growth rates in 2018 and 2019, which were negative 6 percent and negative 6.8 percent, can no longer be denied.
Another feature of Iran’s collapsed economy are the hundreds of bankrupted enterprises and production centers around the country. Farshad Momeni, a government economist, said: “The number of bankrupt firms is growing dramatically. Official reports say that the number of enterprises in the country has increased from 16,800 in 2005 to 14,452 in 2014. While we had more than 2,500 bankrupt units.” (ILNA, April 13, 2021)
He also emphasized the horizons facing producers and government employees, i.e. those who the government is putting its foot on their throat to compensate for its budget deficit, and said:
“At a time when production is on the verge of collapse, the government is making life harder for producers by manipulating key prices due to its financial constraints. After fixed wage earners, who are among the most vulnerable social groups, taxing is affecting mostly the producers.”