Ahmadinejad's economic plans under attack
By Mitra Farnik
WASHINGTON - While Iranian politics have been mostly consumed with the
aftermath of President Mahmud Ahmadinejad's disputed re-election in June 2009,
unease about his ability to steer the economy has been brewing amid high
unemployment and runaway inflation.
With Ahmadinejad's introduction of his proposed fifth five-year plan and annual
budget for Iranian fiscal year 1389 ending on March 20, 2011, conflicts over
the economic management of the country are set to resume center stage and
compound the country's political problems.
Deliberation of these two bills has yet to begin and parliamentary
leaders have said that, given their late and concurrent submission, they will
delay consideration of the five-year plan until next year. There is already
evidence that most lawmakers were surprised by the carelessness with which both
bills have been prepared and with Ahmadinejad's blatant disregard of previous
economic targets.
Members of parliament are faced with hard choices, none appealing. They could
spend the next two months negotiating and effectively re-writing in detail a
budget that Ahmadinejad is likely to ignore. Or they could make Ahmadinejad's
incompetence in budget writing and planning an issue and hence add to his
political woes. Or they could give in to the president, say nothing, and be
held responsible for the economic catastrophe they consider to be in the
making.
The deputies face this dilemma as unemployment hit 11.3% in December, up from
9.5% a year before, while the current five-year plan called for it to be down
to 7% by 2010, the official PressTV reported in January. Annual inflation was
put at 13.5% in December.
The highly expansionary budget was submitted to parliament 45 days later than
mandated by law and called for a 32% increase to almost US$368 billion in
comparison to approximately $280 billion last year. It was introduced after the
subsidies legislation finally became law with the assent of the Guardian
Council. Yet it is based on figures that contradict the legislation intended to
reform Iran's bloated subsidies system.
It took a whole year for the targeted subsidies legislation - calling for
prices of 16 commodities, mainly food and fuel, to be liberalized - to become
law because of parliamentary wrangling with Ahmadinejad. The president insisted
on total control over price increases of key commodities such as gasoline and
diesel fuel as well as the redistribution of the funds generated from the cuts
to needy families.
The parliament, worried about an inflationary shock, mandated gradual price
increases over a five-year period and specifically demanded that in the first
year of implementation the money generated from subsidy cuts be between $10
billion and $20 billion, at most 50% of which could be distributed as cash or
non-cash subsidies as a means to compensate for the cost to consumers of
increased prices.
But the budget submitted for next year assumes that close to $40 billion will
be generated from subsidy cuts. According to Ahmad Tavakoli, a conservative
member of the parliament and head of the parliament's research center, this
figure suggests that the government intends to free fuel prices immediately
"while the law is explicit that this should happen over a five-year period".
Another conservative member of the parliament, Mussalreza Servati, not only
expressed his dismay but also said that members of the planning and budget
committee have already registered their protest in a meeting with the deputy
head of the president's office of strategic planning and oversight in light of
the fact that "according to predictions by some members of the committee the
price of gasoline will increase four-fold ... and the price of diesel fuel
22-fold".
Such price increases are simply unacceptable to many members of the parliament.
According to Tavakoli, "This budget is cause for astonishment and political and
economic lament ... If the government continues these illogical obstinacies ...
we do not see the implementation of the targeted subsidies law as being in the
interest of the country under these conditions."
Gholamreza Mesbahi Moghadam, the conservative chair of parliament's special
committee on the economic transformation plan, also insisted that the
parliament will simply not allow such disregard of the law, despite
Ahmadinejad's insistence that the budget should be approached in its totality
and not be dealt with in parts.
The parliament will have a hard time giving Ahmadinejad much latitude given the
skepticism that exists towards a budget proposal that takes up only a few pages
and gives very general and vague numbers.
Tavakoli expressed his skepticism and surprise at the government's actions by
saying, "The budget is a financial reflection of the government's legal
obligations in any given year. The administration cannot propose a doubling of
revenues from taxation and when questioned say that we doubled the rate of
taxation; this is just a proposal and the parliament can change it.
"This is not the way to write a budget. Writing a budget means that the
administration must predict its income and expenditure based on its legal
responsibilities."
But critics of the budget at least have tried to deal with the numbers
presented.
Ahmadinejad's departure from the tradition of detailed five-year economic plans
with clearly stated objectives in terms of indicators such economic growth and
investment rates - even if hardly ever fulfilled - has elicited disdain at best
and sneers at worst.
Parliamentary leaders have already said that the plan will not be dealt with
until next year, hence effectively extending the fourth five-year plan, written
during the previous administration of president Mohammad Khatami, to six years.
Several parliamentarians have also said that the plan has to be effectively
rewritten by the parliament given that its few pages resemble a "wish list"
more than an economic plan.
Even Ahmadinejad's first minister of economy and finance, Davood Danesh Jafari,
has been damning in his assessment, stating, "This plan is not compatible with
any scientific definition of a plan. No one is against the title of this plan;
that is progress and justice. But implementation strategies for the realization
of this plan are unclear."
The plan's generalities also depart from Iran's previous economic documents -
such as the "20-Year Outlook" or "Outlook for Principle 44" - by mostly
ignoring long-standing objectives set out in these documents, such as the
reduction of the size of government, empowerment of the private sector, and
privatization of government-owned enterprises.
Faced with Ahmadinejad's consistent effort to depart from past practice in the
economic arena, members of the parliament as well as others in positions of
authority could accept that Ahmadinejad really knows what he is doing but
simply chooses to act differently as a way to re-direct the economy along the
lines he considers better for the country.
They may also have to face the possibility that Ahmadinejad has been
intentionally careless in order to use the rejection of his plans as an excuse
to blame the parliament for the country's deteriorating economic conditions.
More likely, however, they will agonize over the behavior of a president who is
leading the country by trial and error at a time when any significant challenge
to his competence could show that his opponents during the election campaign,
as well as those who have protested since the election, were right to say
Ahmadinejad should not have been allowed a second term as president.
Mitra Farnik is the pseudonym of an Iranian writer based in Washington
DC.
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