The problem these days with writing on Iranian economy is the number of subjects to write and not the lack of a topic of interest. The most noticeable event was the change of the guard in the ministry of Economic Affairs. Dr. Danesh Jafari, whose immediate departure had been a topic of rumors in capital, left his office not so quietly. In his farewell address he gave an account of internal conflict over the economic policies in Iranian government.
He highlighted the lack of belief in the principle concepts of economics theory, the lack of trust in experienced individuals and the lack of belief in the 4th development plan as the road map of development in Iran. He told his audience: “the government does not consider the 4th development plan as an obliging document and yet it has not introduced a substitution.”
He mentioned the friction between the government and other bodies and organizations. He also criticized those who do not know much about economics and economic affairs and create crisis through misinformation. He offered a history of these events, such as accusing the managers of insurance companies of fraud, accusing an unknown high official of accepting bribes to grant license to import cigars, accusing tax services of being unfair and some other incidents.
He particularly named Dr. Jahromi the minister of Labor as someone who opposed his line of policies by saying: “Whatever we did to persuade this dear friend of ours, Dr. Jahromi, that publishing money does not create jobs, was unsuccessful.” His account was the headlines of Iranian papers the day after and forced the Vice President to deliver a speech to defend the government’s economic policies right there and then.
Dr. Jahromi is already a known name in policy making circles. To many he is the main leader of those who advocate a further reduction of interest rate and oppose the policies advised by the economists in the Central Bank of Iran and Economic Affairs Ministry. He already made that well known by writing an open letter to the President criticizing the monetary package suggested by the Central Bank to control inflation accusing it of hurting production.
In his letter Dr. Jahromi wrote: “In last year private banks by using the agreed upon rate of return charged much higher rates than what government approved.” He recommended: “There must be investment companies to prevent banks from investing directly.” He highlighted the policy regarding banking sector by saying that it is a matter of policy to limit the banks to banking services and to prevent them from investing. His reason for such an approach is Iranian banks “natural” desire to invest in service sector where a short term profit is available and their reluctance to invest in long term projects.
Dr. Danesh Jafari departure is assumed a victory for Dr. Jahromi and his supporters in the cabinet. However many experts continue to warn against the government’s economic policies. Many say that adopting such policies would increase an already high inflation even more. In response President Ahmadinegad in a recent speech in Qom accused those with special interests in banks, customs and monopolies to conspire against the government causing the inflation.
The rising housing prices, the global food crisis and the forecasted drought and above all rising inflation that according to the Central Bank continues to rise all draw a challenging picture for Iranian economy. And the critiques of the government have wasted no time in blaming government policies. However at the end of the day the issue is not one of the policy but of believing in economics as a science. As many economists point out readily: “The prevailing opinion is that of engineers and not that of economists in policy making in Iran.”