Record-breaking by Raisi in capital flight from the country
According to the report of Iran Gate Central Bank, Raisi broke the record in capital flight from the country in the past week when the net capital account statistics for the first half of the year were released. This report revealed a bitter reality about the country’s economic structure during the current year. According to this report, Ibrahim Raisi’s government has broken the record of capital flight from the country, which was previously held by the first government of Mahmoud Ahmadinejad.
Last week’s report by the Central Bank highlights a concerning situation regarding one of the vital components in Iranian society. The report indicates the breaking of a record of about 20 years in capital flight from the country in the first half of the year 1401 (2022) by the government of Seyyed Ebrahim Raisi. According to this report, the net capital account has crossed the negative threshold of $12.85 billion in the first six months of the current year.
This figure, which had previously occurred during the ninth government, reflects the disastrous performance of the government in ensuring investment security. If such security is not provided at any point on the globe, it convinces the investor to flee.
According to the Central Bank’s financial report, this indicator was approximately negative $10 billion in the first quarter of 1401. However, due to the failure of the JCPOA negotiations and the government’s strange and interventionist policies in the economic and social sectors, this amount has exceeded the negative threshold of $12.85 billion by the end of Shahrivar.
What is the capital account report?
In macroeconomics terminology, the capital account is recognized as one of the components of the balance of payments. It includes all transactions that result in a change of ownership in assets or foreign liabilities. In other words, when the capital account is negative in a country, it indicates an outflow of capital from that country.
In simpler terms, when this figure, like what is observed in Iran, is negative, investors or traders in financial markets have a much greater inclination to invest or trade outside the country. Therefore, this economic indicator is important for assessing the inflow and outflow of capital from countries.
However, it should be noted that the mere positivity of this indicator does not necessarily imply the effectiveness and productivity of a country’s economic mechanism. This is because speculation and stock market manipulation in domestic markets may lead to greater prosperity for various reasons than investing in neighboring countries, which is usually the first choice of the middle class.
For example, currently, as the Turkish economy is facing a serious crisis, the inclination of Iranian small and large investors to enter the markets of this country has also decreased. It should be noted that despite this decrease in motivation, we are witnessing a record-breaking trend of capital flight from the country by the government. In other words, if Turkey was the first destination for Iranian investors in the field of economy and livelihood, like in the years 2010 to 2020, today we are witnessing much larger and astronomical figures than this, as announced by the central bank.
The golden era of Khatami, and the era of Ahmadinejad and Rouhani
By examining the history of capital account reports in Iran, it becomes clear that only in the years 1981, 1982, and 1983 did this figure become positive in Iran. In fact, it can be said that in the years following the Islamic Revolution, Iran’s economy only faced an influx of capital in these three years, rather than witnessing capital outflows from the country. However, before and after these three years, the country has consistently faced capital outflows, which have been accompanied by periods of intensity and weakness.
According to experts, the positive trend of capital inflows into the country in the early 1980s was also a natural and logical result of adopting policies of interaction with the world, which were implemented by the government of Mohammad Khatami. These policies opened up international trade doors for Iran and helped the country break free from economic isolation. However, with the arrival of Mahmoud Ahmadinejad in 2005, the tide turned, and since then, the capital formation rate in the country has consistently been negative.
Although there were significant positive reports after the signing of the JCPOA in 2015, the two-year period of implementing the JCPOA also failed to save this important economic component from going below zero, and the capital formation rate in Iran has remained negative until now. However, the achievement of Ibrahim Raisi’s government in this regard is a masterpiece, reaching a record negative of $12.85 billion, which has been unprecedented in the past 20 years. Considering that in the second half of the year, the capital account usually worsens, there is a higher probability of this figure increasing by the end of the year.
A special report titled ‘A New Currency Crisis is on the Way’ has been published in Iran Gate, and it is recommended to read it if interested.
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