The Impact of Sanctions on the Death of Markets
According to Iran Gate, a comparative report on the average amount and number of issued checks, as one of the criteria for assessing the economic situation, indicates the overall economy’s susceptibility to the intensification of sanctions from 2018 to 2022.
Statistics related to exchanged checks have always been considered one of the factors for assessing the economy’s condition on a macro level because tools like checks are not used for minor financial exchanges and mainly indicate transactions.
In fact, based on the statistics discussed further, it can be concluded that not only has the amount of medium and large household purchases significantly decreased, but large and small industries and various businesses have also been severely affected by the inflation resulting from intensified sanctions.
This report, which is the second part of the investigation into two aspects of Iran’s banking transactions, examines the relationship between the statistics of issued checks and the U.S. withdrawal from the JCPOA. The reduction in the purchasing power of different social classes following the inflation spike due to intensified sanctions is the main factor behind such an unfortunate transformation in the country’s economy.
Fivefold Increase in the Average Amount of Each Check
People’s purchasing power has decreased not only in daily purchases but also in larger purchases. This issue has been examined by comparing bank check exchanges as one of the payment tools for larger amounts. The table below shows the official statistics from the Central Bank on exchanged checks in April 2018 and 2022.
Statistics show that the number of exchanged checks in April 2018 was 6 million and 712 thousand, which decreased to 5 million and 185 thousand in April 2022.
What Do These Statistics Mean for Households?
Since exchanged checks are usually used by households for purchases like cars, land, houses, and more, the 23% reduction in check usage over these four years clearly indicates the recession in markets like household appliances, housing, cars, and more. In other words, this significant decrease indicates a severe reduction in the ability of Iranian households to make medium and large purchases.
Despite this drop in the number of checks, the amount of checks has almost quadrupled, increasing from 46 trillion tomans in April 2018 to 183 trillion tomans in April 2022. The average amount of each check has also jumped by 413%, from 69 million tomans in April 2018 to 354 million tomans in April 2022.
Therefore, it can be said that people are facing difficulties in their larger purchases as well, paying significantly more for fewer transactions. However, the important point is that the number of issued checks has decreased, which means that purchases are being consolidated into less frequent occasions. This issue implies a decline in the quality of life for citizens, as households spend more time acquiring life necessities and have access to fewer amenities.
The Signal of This Report for Businesses
As mentioned earlier, checks are the most important tool for medium and large-scale transactions, mainly related to companies or families that are either growing or have adequate financial means. The household discussion was addressed in the above sections, but what is the message of these statistics for businesses?
The income level of any organization is directly related to its expenses. In other words, if we assume a manufacturing company, the more the cost of procuring raw materials and hiring human resources increases, naturally, the production level and ultimately the organization’s income should also grow. Of course, there are deterrent factors that are not addressed here.
However, it should be noted that checks are the main tool for company expenditures. When the number of issued checks and the average amounts do not align with the rate of inflation growth, it means a reduction in expenditures and consequently company income. The reduction in business revenue results in efforts to cut costs, typically starting with workforce downsizing.
In other words, these statistics can indicate a severe recession in the productive sectors of Iran’s economy during the period of intensified sanctions, inevitably leading to increased unemployment and poverty in society. On the other hand, looking at economic growth statistics in the 2010s and comparing the first half of the decade with the second half, the U.S. withdrawal from the JCPOA in 2018 shows a sharp decline in this factor.
In fact, it can be said that the productive sectors of the economy went into a coma during the years of the U.S. withdrawal from the JCPOA, and vulnerable groups have been severely harmed by this disaster. The result of these events is nothing but a decrease in the quality of life for citizens in the middle deciles and an intensification of poverty among the lower-income deciles.
