Ten Major Economic Challenges Blocking Governance
Ten Major Economic Challenges Blocking Governance
Economists in the country emphasize that Iran’s economy is facing at least 10 major and chronic imbalances in sectors such as energy, banks, budget, industry, and even foreign policy. According to these experts, these imbalances are not only the result of ineffective policies but also the product of an imbalance-creating governance structure. In other words, the country’s economic and political system is designed in such a way that, instead of solving problems, it continuously creates new imbalances. This note explores the roots of some of these imbalances and then offers a solution to overcome this crisis.
Roots of Imbalances in the Banking and Budgetary System
Iran’s banking system has reached a critical state due to expansionary policies, heavy reliance on central bank resources, and controls outside the market system. The unchecked growth of liquidity, along with the banks’ massive debts to the central bank, has led to increased inflation. Despite repeated promises to control inflation, these imbalances have resulted in no success in reducing it, and inflation remains relatively high.
On the other hand, the government’s budget deficit, a major part of which is due to reduced oil revenues and sanctions, has led to increased pressure on banks and borrowing from them. To compensate for the deficit, the government is forced to increase taxes and reduce imports of certain goods, which in turn exacerbates the recession and creates more problems. This vicious cycle requires structural changes.
Imbalance-Creating Structure in Pension Funds
Pension funds are another imbalanced structure in the country’s economy. These funds, which should fundamentally have stable investments and strong financial resources, have become one of the main factors of the budget deficit due to pressure on the public budget and mismanagement. The imbalance between the input and output of these funds has become so widespread that, according to the calculations of the Parliament’s Research Center, the government is forced to allocate nearly 500 trillion tomans annually from the budget to cover their deficit. This situation is the result of decisions that, instead of strengthening the financial resources of the funds and managing their investments, have made these funds dependent on the government budget.
Imbalance in Foreign Policy and Trade
Another existing imbalance is in foreign policy and trade, which is also a significant factor exacerbating the country’s economic problems. In Iran, various and conflicting approaches to foreign policy have led to economic imbalances. Unstable policies and ineffective interaction with global markets have reduced the country’s export and import capabilities and complicated the economic conditions.
With the continuation of sanctions and the lack of improvement in international relations, the possibility of reforming economic structures is also reduced, and these imbalances increasingly impact Iran’s economy. Although the fourteenth government has focused its efforts on improving foreign relations, it does not seem that Iran’s entry into global markets will improve in the near future, given the escalating conflicts in the region.
The Need for Structural Reform to Overcome Imbalances
As mentioned in the introduction, Iran’s economy, due to an imbalance-creating structure based on monopoly, reliance on oil resources, and politicization in economic decision-making, has continuously produced imbalances. It seems that the only way out of this situation is structural reforms and changes in ineffective economic policies. Reforming the relationship between the government and economic institutions, providing more space for the real private sector, reducing interference in market performance, improving transparency in managing public resources, and increasing international interactions are important strategies that can improve this situation.
The Necessity of Institutional Convergence and Public Support
Solving the imbalances is not only possible through technical and economic reforms but also requires social support and convergence among governmental institutions. Without social backing, economic reforms are doomed to fail. Furthermore, coordination among various branches, from the government to the judiciary and other governing bodies, is essential for these reforms to succeed. To reduce existing imbalances in banking, pension funds, and the budget, a comprehensive and inclusive approach is needed.
In this context, the consensus perspective highlighted in the fourteenth government’s views can be considered one of the foundations for structural and economic reforms. Consensus and solidarity among the government, parliament, governing institutions, and the people enable us to carry out policymaking in a coordinated manner with collective interests in mind.
This solidarity can reduce conflicts of interest and increase cross-sectoral cooperation, providing a platform where economic decisions are implemented without creating political conflicts or short-term interests. Given the perspectives put forth in the government of Pezhman, this consensus and harmony among various political and social groups can be a starting point for effective reforms in the banking system and pension funds, as well as reducing the budget deficit.
