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Articles by Navid Kalhor
Iran’s budget banking on US lifting sanctions
Dec 14, 2020 As Iran's legislature is debating the budget for the coming Iranian year, questions remain about the feasibilty of the proposed figures and its heavy reliance on oil revenues. The budget bill for the next Iranian year that starts March 21 was submitted to the parliament Dec. 8 with the headline numbers having massively ballooned compared to the current year's Budget Law.
Poverty spikes in Iran as prices for essential goods rise
Nov 17, 2020 Recently released figures on the cost of essential items for lower-income segments in Iran show that the rise in the price of these items — predominantly food products — has indeed put a lot of pressure on vulnerable groups in the country.
Misfiring trade policies could lead Iran to deeper trade deficit
Oct 26, 2020 With the reimposition of the harsh sanctions against Iranian oil exports in 2018 by the Trump administration, officials in Iran have focused on non-oil exports as the only viable way to meet the country's foreign exchange needs. But the country's trade policies have failed to resolve the bottleneck created in the absence of petrodollars. In terms of commodity diversity, most of the country's non-oil exports are still dependent on oil and mineral products.
Why Iran could be approaching hyperinflation in coming years
Aug 9, 2020 The asset markets in Iran have been witnessing sharp surging spikes in prices in the recent weeks and months on the back of astonishingly rising money supply. The Tehran Stock Exchange Index, with a return of more than 147%, was the best performing market, followed by the gold, foreign exchange and housing markets with a return of 30.5%, 24.8% and 19.1% respectively in the spring (March 20-June 20).
Iran Resorts to New Financial Tools to Shore-Up Economy — Bourse & Bazaar
The COVID-19 crisis has forced Iran’s government to turn to little-used financial tools to help stabilize the economy and address a widening fiscal deficit. In the arena of monetary policy, the crisis is the first test of the new Open Market Operation (OMO) powers announced by the Central Bank of Iran (CBI) on January 18.
Tehran stock market could remain strong despite Iran's economic downturn
The benchmark Tehran Stock Exchange index managed to break above its all-time highs just before the Iranian fiscal year ended March 19. The annual total return reached a whopping 187%, registering the highest annual growth in the exchange's existence. Interestingly, the equal-weighted index, the barometer applied to measure the performance of micro-size listed companies, rocketed up during the same period by 437%.
Iran plans to wean budget off oil income by next year
The Iranian government has decided to eliminate its budgetary reliance on oil sales for the fiscal year beginning in March 2020. The administration kickstarted the policy by reducing gasoline subsidies on Nov. 16. This measure is meant to ease budgetary pressures caused by the US maximum pressure campaign on the country's economy, in addition to helping lower-income groups by increasing their cash subsidies.
Iran's commercial code reform invites turmoil
After years of delay, Iran’s parliament suddenly approved 331 articles of the first book of a massive trade reform bill in just one week in mid-September. This came as a surprise to many economic and legal analysts and raised concerns about the fate of the remaining four commercial code books awaiting lawmakers' final verdict.
Tehran stock market rally likely to continue
Iran’s stock market has been rallying in recent weeks and months, notching fresh all-time highs. The Tehran Stock Exchange (TSE) Index spiked by 0.07% to close at 278,674 points on Wednesday, its return was a whopping 55.9% according to the report posted on the TSE's website. The recovery is also in line with analysts’ estimates for the benchmark’s rise around 60% over the year, conducted and published by the economic Daily Donye-e-Eqtesad on July 16.
Improved employment leaves Iran’s women, youth behind
Iran’s unemployment rate fell by about 1.3 percentage points in the first quarter— which ended June 21 — to 10.8%, down from 12.1% in the corresponding period a year ago, according to a report issued by the Statistical Center of Iran. But the jobless rate remained remarkably high in the working age group of 15 to 29.
Why attempts to reform budget structure might hit a dead end in Iran
Iran's Planning and Budget Organization is seeking to reduce the government budget’s direct dependence on oil revenues. Budget deficits, foreign exchange reserve imbalances and extra liquidity were cited in a recent report by the organization as major factors damaging the Iranian economy over the years. The US maximum pressure campaign on Iran’s economy has drastically reduced the country's foreign exchange earnings from oil sales.
Iranians floored by sky-high housing costs
Home prices in Tehran more than doubled in the quarter that ended June 21 compared with a year earlier, after a prolonged period of relative price stability in the properties market. Extreme fluctuations in the markets for alternative assets like gold coins and currency also caused residential property prices to skyrocket, as investors looked to hedge their capital against value loss. This was largely fueled by Washington’s unilateral exit from the Iran nuclear deal in May 2018.
Tehran to tackle currency woes with new forex
Extreme foreign exchange-market fluctuations are highly likely to continue to menace Iran’s national currency, the rial, and the Iranian economy. A new integrated foreign exchange market is in the works to meet this challenge. NIMA, the state-run secondary foreign exchange market launched just over a year ago, hasn’t brought about the intended results for the Iranian economy due to the Central Bank of Iran’s weak regulatory oversight.
Iran's 'throw money' economic strategy failing
Having access to working capital is considered the most basic requirement of manufacturers in Iran. Under normal circumstances, industry generally obtains liquidity from four main sources: financial institutions, the National Development Fund, the capital market and, ultimately, credit lines and foreign investment.
How Iran’s ‘justice shares’ impede state divestment from the economy
In the 40 years since Iran’s Islamic Revolution, consecutive Iranian governments have pursued social justice as a key policy principle. The distribution of so-called justice shares, beginning almost 12 years ago, is one such example of a populist policy that had been promised to underprivileged Iranians under mass privatization programs. The aim of the justice share program was to distribute stocks of state-owned enterprises that could yield dividends to millions of poverty-stricken families.
Why the Iranian government must modernize its cash management system
Managing and controlling the government’s cash resources has long been a major challenge to the implementation of budget laws and oversight of the government’s receipts and payments from and to a diverse number of state and nonstate agencies and entities in Iran.
Why Rouhani should think beyond price controls to contain inflation
Turbulent fluctuations in the value of the Iranian currency on the open market in 2018 led to the establishment of the Supreme Economic Coordination Council.
Why Iran must shake up its approach to state-owned enterprises
A year ago, President Hassan Rouhani’s budget proposal for the next Iranian year (beginning March 21) sparked a heated internet debate among Iranians. The main cause of their anger was the lavish funds allocated to certain state agencies and institutions. However, what was left unnoticed and indeed in need of much more public attention was the draft budget's section on state-owned enterprises.
Iran Budget Under Scrutiny As Oil Revenues Fall
Next week, President Hassan Rouhani will submit a budget proposal for the forthcoming Persian year (covering March 2019-2020). The budget bill’s adherence to fiscal rules and the reasonableness of its estimates will be under intense scrutiny given the volatile political and economic climate in Iran.
Why the Rouhani administration must eliminate energy subsidies
According to the latest figures from the Central Bank of Iran, the government’s budget deficit spiked by a whopping 105% in the first half of the current Iranian year (which began March 21) compared with the same period the previous year. Part of the issue has to do with massive fuel subsidies. President Hassan Rouhani’s administration is now obliged to provide at least 180 trillion rials ($4.29 billion) in hidden subsidies to Iranian car owners until spring.
Analysis: How the Tehran Stock Exchange rally could benefit the Iranian economy
The Tehran Stock Exchange (TSE) has hit astonishingly new highs in past months, netting a return of above 15% in the week ending Sept. 26 alone — the highest weekly rise in its over half a century of existence. Since the start of the Iranian year on March 21, the TSE index has risen almost 90%, while its average volume of transactions has jumped by more than 400% compared to the same period in the previous Iranian year.
How the Rouhani administration can contain excess liquidity
Inflation is quickly rising in Iran on the back of a continuous and uncontrollable growth of liquidity. Two basic factors explain the ongoing slump in the economy. One is the ineffectiveness of the government's fiscal policies. The other is the monetary objectives of the Central Bank of Iran (CBI); these are frequently dictated by governments, including that of President Hassan Rouhani.
How rial's devaluation may boost Iranian economy
The money supply in the Iranian economy exceeds $355 billion at the official exchange rate, remarkably surpassing total economic output of $331 billion. Financial depth, a metric showing the ratio of liquidity to gross domestic product, is commonly indicative of the state of a given economy.
Can 'de-dollarization' break Iran’s economic isolation?
While the nuclear deal struck between Iran and six world powers in 2015 lifted international sanctions, it failed to remove primary US restrictions on dollar transactions. As such, some in Iran have grown to view currency swap agreements (CSAs) with other countries as a way to overcome remaining US sanctions.
Why economic growth has not led to job creation in Iran
Last fall, the World Bank forecast that Iran’s economy will grow by merely 4% and 3.4% in 2018 and 2019, respectively. These rates are much lower than what the Islamic Republic is seeking in its sixth five-year development plan (2016-2021) and 20-Year Vision (2005-25). As such, it seems that Iran is set to fail in implementing its strategic plans to achieve economic growth of 8%, including schemes that were deemed vital to boost productivity and job creation in the country.
Iran's poorest citizens still waiting for some semblance of parity after 39 years
When the 1979 Islamic Revolution in Iran took place, its overriding objective was social justice achieved through helping the poor and ensuring political freedom. However, after almost four decades, the income of low-wage earners nationwide has plummeted as the wealthy have grown wealthier.
Dropping interest rates could increase inflation in Iran
TEHRAN — Real interest rates in Iranian money markets have risen to all-time highs under the administration of President Hassan Rouhani. This is due to the sharp reduction in inflation, which the administration boastfully declares as its cornerstone achievement. Nonetheless, the rise in real interest rates has mostly occurred on the back of lackluster growth given macroeconomic fluctuations both at home and abroad.
Rouhani’s bad news budget
With the recent wave of protests in Iran igniting debate over the government's budget bill for the next Iranian year (beginning March 20), it is important to understand how President Hassan Rouhani's administration has been approaching the matter. In the bill Rouhani submitted to parliament Dec. 10, the government’s general budget is set at $103 billion, 6.1% higher than the previous budget in rial terms.
Imprudent foreign financing could jeopardize Iran’s economy
Facilitating foreign financing has been among the top items on Iranian President Hassan Rouhani’s agenda since the signing of the nuclear deal in 2015. Under the current circumstances, with domestic lenders grappling with a credit crunch, the best alternative appears to be embracing foreign capital to help boost economic output.
Iran’s debt market emerges as key to economic future
The rising issuance of various Islamic sukuk and, in particular, Islamic Treasury bills in the past three years in Iran is seen as evidence of the success and allure of the Iranian debt market. However, it should be noted that widespread sales of Islamic Treasury bills on Iran’s nascent bond market come at a price.
Surging imports wipe out Iran’s trade surplus
TEHRAN, Iran — Economic growth is generally generated by four sources: increasing private consumption, expanding private investment, higher government consumption and investment, and more exports. At present, when it comes to the first three, there is no potential for picked up economic output in Iran. Although efforts have been made to increase private investment, the data still show that Iran is faced with an outflow of capital.
Iranian shareholders face rocky road ahead
In its 50-year history, the Tehran Stock Exchange (TSE) staged its best performance in the Iranian year beginning March 21, 2013. But by January 2014, it struggled to break or even maintain the record touching 89,500 mark. The bullish breakout occurred some six months after Hassan Rouhani was elected president for the first time. Now, over 3½ years later, the main index is hovering below 84,000.
Gloom surrounds Rouhani’s budget for new Iranian year
Iranian President Hassan Rouhani takes part in a press conference near the United Nations General Assembly in New York, Sept. 22, 2016. (photo by REUTERS/Lucas Jackson) In recent decades, the budgeting process in Iran has been such that the budget’s capacity to function as the country’s most important fiscal policy document has continuously declined.
Iran’s private sector having hard time financing expansion
An Iranian shopkeeper counts money as he waits for customers in front of his shop at a bazaar in northern Tehran, Iran, Jan. 16, 2016. (photo by REUTERS/Raheb Homavandi) The Islamic bond market in Iran was first kick-started in 2011, with Mahan Air’s issuance of ijara sukuk on the over-the-counter Iran Fara Bourse (IFB) to finance its purchase of an Airbus passenger jet.
Why pension funds in Iran could face bankruptcy tsunami
Tehran, IRAN — One of the key underlying economic challenges of Iran is the current underfunding of its pension system. Make no mistake: Pension reform must be a priority for the country. Figures posted by the Ministry of Cooperative, Labor and Social Welfare show that "a major portion of pension funds have either gone completely bust or are among the ones relying tremendously on state resources," reported Eqtesad News on Jan. 23.
Why Iran’s private sector hasn't benefited from privatization
People walk past shops in an upmarket suburb in northern Tehran, Iran, May 3, 2016. (photo by REUTERS/Marius Bosch) TEHRAN, Iran — Privatization in Iran only effectively started in 2001. Five years later, in 2006, Supreme Leader Ayatollah Ali Khamenei backed a constitutional amendment — the Law on Implementation of General Policies of Article 44 of the Constitution — to ease the sale of state-owned enterprises in an attempt to downsize government and help expand the private sector.
Why Iran’s banking shake-up won't be enough
The head of the Central Bank of Iran, Valiollah Seif (R), speaking with Iran's head of the Atomic Energy Organization, Ali Akbar Salehi, Tehran, Jan. 17, 2016.
Why a cheaper rial could actually help Iran
A currency exchange dealer displays a US dollar at the window of his shop in a shopping center in northern Tehran, Oct. 3, 2010. (photo by REUTERS/Morteza Nikoubazl) TEHRAN, Iran — At present, Iran has both an official exchange rate and an unofficial market rate that is used in exchange houses. The rial trades at above 35,000 per dollar on the open market, compared to the official rate of around 31,000.
One year on, US obstacles blunt hopes from Iran deal
A year ago, a landmark nuclear deal with world powers led jubilant Iranians to dream of an end to isolation and economic hardship, but critics say US obstacles have soured those hopes (photo by Atta Kenare/AFP) A year ago, a landmark nuclear deal with world powers led jubilant Iranians to dream of an end to isolation and economic hardship, but critics say US obstacles have soured those hopes.
Rouhani banks on small businesses to generate big growth
An employee works at a small business in Tehran, Iran, Jan. 19, 2016. (photo by REUTERS/Raheb Homavandi) TEHRAN, Iran — To achieve its target of 5% economic growth this year, the administration of President Hassan Rouhani is seeking to revive small- and medium-sized enterprises (SMEs) by continuing to focus on attracting foreign direct investment into slumbering industrial estates.
Why sanctions relief has not been enough to kick-start Iran's industry
An Iranian worker is seen at the Steel Saba Complex in Isfahan province, south of Tehran, Aug. 12, 2004. (photo by REUTERS/Morteza Nikoubazl) TEHRAN, Iran — A cursory review of changes in the volume of untreated steel, base metals and petrochemical products traded on the Iran Mercantile Exchange reveals that demand is depressed. Disregarding imports, it is evident that local industry is on a downward trajectory.
How Rouhani is moving to boost Iran's stock market
An Iranian investor checks stock information on a screen at the Tehran Stock Exchange, Aug. 3, 2010. (photo by REUTERS/Morteza Nikoubazl) TEHRAN, Iran — Central banks play a key role in maintaining sustainable growth in equity markets through monetary policies. To this end, crucial strategies include adjusting the interbank interest rate in the context of a close watch on overall inflation trends.
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