In the year 1402, we should expect hyperinflation.
In the year 1402, we should expect hyperinflation. According to Iran Gate, the details recently released about the budget indicate the government’s intention to expand the 1402 budget bill compared to the current year. The statistics show that government expenses will increase by more than 800 trillion tomans. Therefore, it is expected that the government’s current budget will be around 2 quadrillion tomans, which means an approximately 65% increase in government expenses compared to the current year.
The approximately 65% growth in the government’s budget for the year 1402, which will likely increase significantly after passing through the Parliament, has become a new concern for economists for the coming year. On the other hand, the budget related to state-owned companies, which always took a large share, has reached 3 quadrillion tomans for the next year. This figure indicates a definite and large budget deficit for the government in the year 1402.
Disorder in budgeting and the repetitive story of printing money.
Experts’ concerns about the details released from the 1402 budget bill generally revolve around the rampant inflation rate. In fact, critics of the economic policies of the Thirteenth Government believe that such an approach will ultimately lead to nothing but government borrowing from the Central Bank. Borrowing means the issuance of money and the growth of the monetary base, which is the main source and cause of the devaluation of the national currency and the intensification of inflation.
The courage that does not exist.
Some economists who support the concept of a free market believe that the Thirteenth Government has neither the motivation to reform the budgeting system nor the courage to make structural and serious reforms in cabinet decisions. For example, the most important reform that could be effective is the separation of the foreign exchange budget from the rial budget.
Many economists believe that the Raisi government, in a situation where oil revenues are at their lowest, cannot proceed with budgeting with the extravagance that has always existed in the country’s management. Therefore, experts believe the government should first take action to separate these two budgets, so neither the cabinet becomes deluded about its income and expenditures, nor attempts to mislead public opinion in this way.
If this action is taken, considering the country’s foreign exchange revenue situation, we will face a severe budget imbalance. An imbalance that has several ways to be compensated, commonly referred to as borrowing. In fact, with this action, the actual amount of government borrowing from the Central Bank or through bonds will be determined. Borrowing that is currently happening, but it is still unclear what the government’s actual share of borrowing is and consequently how much it intensifies inflation.
A complication called the Nima exchange rate.
However, the strange point about the 1402 budget is the astonishing decision to fix the Nima exchange rate at 28,500 tomans. Even stranger is setting the dollar price for imports at 23,000 tomans, which experts believe could mean intensifying corruption.
This action, which was previously experienced in 2018 and led to problems arising from setting a 4,200-toman rate for preferential currency, is now being repeated in a different form with a populist veneer. Of course, this policy was previously implemented during Ahmadinejad’s government at a rate of 1,200 tomans, resulting in disastrous outcomes. Among the smallest destructive consequences of implementing this plan during Ahmadinejad’s government was the emergence of figures like Babak Zanjani, whose case remains unresolved.
In other words, if the Raisi government and the Central Bank intend to fix the Nima rate, we should expect heavy costs from intensified corruption in people’s daily lives, because the difference between this 23,000-toman rate and the free market dollar price must be paid from the pocket of the people, whose assets are currently entrusted to the Thirteenth Government.
Hyperinflation is serious.
Considering the signals received so far from the 1402 budget bill, it is expected that the intensification of inflation in the coming year will be definite and serious. Inflation that the most optimistic economists predict to be in the range of 65 to 70 percent for the year 1402. However, there is also a pessimistic view that sees a scenario of triple-digit inflation rate for the coming year in the future of Iran’s economy.
However, logically and if Iran’s policies regarding the JCPOA and even the FATF do not change, it is expected that in the best conditions, the annual inflation rate for the year 1402 will exceed 70 percent, which means the doubling of the rate of increase in the prices of consumer goods for people in the coming months.
The following articles related to this writing have been published on Iran Gate:
- Raisi’s Inflation or Iran’s Inflation
- Iran’s Banking System is Bankrupt
- The 1402 Budget: Raisi Government’s New Masterpiece
