Iran's Economic Woes Run Deeper Than Sanctions, Economist Says

Iran's chronic mismanagement and rampant inefficiencies have led to severe economic challenges, to the extent that even lifting sanctions may not ensure a quick recovery, an economist says.

Warning of a worsening economy in the coming months, Tehran economist Morteza Afghah told local media that the roots of the problem lie in the regime’s non-developmental strategy that prioritizes ideological and political agendas over economic progress.

“The reality is that over the past three decades since the end of the [Iran-Iraq] war, the country's economy has been mismanaged. Economic problems have multiplied, and economic and social indicators have deteriorated,” he said. “The reason for this is deeper than even economic policies,” Afghah stressed.

He noted that the problems facing the country are primarily manifested through economic challenges, but their roots are non-economic, criticizing the government for wasting resources of the country with inefficient decision-making.

Despite having a large number of qualified, young, patriotic, educated, and skilled human resources, as well as valuable natural resources, Iran is suffering from poverty, unemployment, and inequality, leading to various social challenges such as addiction, child labor, unsupported women, and theft, he said.

“The main root of the current situation is philosophical and influenced by the non-developmental value system of the decision-makers,” Afghah noted, explaining that such an approach “prioritizes ideological, jurisprudential, and political issues, and does not give due importance to economic well-being and people's livelihood.”

He decried the current practices and government's attempts to address the symptoms rather than the root cause of multiple crisis.

"The Iranian government has used a variety of measures to cover its budget deficit, including selling bonds, state assets, and state-owned companies; eliminating subsidized dollars; spending the National Development Fund; raising taxes; increasing the prices of goods and services," and printing money.

Describing the US withdrawal from the 2015 nuclear deal as a heavy blow that exacerbated Iran’s economic problems, Afghah said that former US president Donald Trump’s decision was the result of Iran’s wrong policies. He also rebuked Iran’s hardliners for welcoming US and international sanctions and disregarding their impacts on the country. He quoted former president Mahmoud Ahmadinejad, who famously called UN resolutions “useless pieces of paper” and dared the Security Council to keep issuing them over Iran over its nuclear program.

The economist argued that the government has no choice but to negotiate with the US in order to lift the sanctions. Additionally, Tehran has to resolve its issues with the International Financial Task Force (FATF), which has kept Iran on its financial ‘blacklist’ in recent years for not adhering to transparency and international conventions against money laundering and financing of terrorism.

If the Iranian government is unable to reach an agreement to lift the sanctions and resolve the FATF issue, and regional tensions continue, the economic and social conditions in Iran will deteriorate significantly, he said.

“The hardline Principlists, who dominate the new parliament and the government, prioritize ideological and political issues over solving the economic and social problems of the country. The possibility of Donald Trump's re-election further increases the uncertainty and the economic risk. As a result, we can expect the Iranian currency to lose more value, rising prices and worse economic indicators, more emigration and brain drain, and the flight of capital,” the economist said.

However, he argued that even if the sanctions are lifted, the Iranian economy will not improve significantly. “In the best-case scenario, the situation will not get worse, but it will not get much better either."

Iranian lawmaker Masoud Pezeshkian echoed similar concerns on Monday, highlighting that the main reason for the government’s failure in fulfilling its economic promises is not employing experts for the jobs. “The administration had promised to reduce inflation to less than 10 percent, now it is hovering around 50 percent. It had promised to build one million housing units, but they cannot do it even if eight years at office."

Pezeshkian went on to say, “We always try to say everything is fine and not address the issues we have. As a result, when people protest about the problems, we claim that they are wrong, and we have achieved success."