Ten major economic challenges obstruct governance
Ten major economic challenges obstruct governance
Economists in the country emphasize that Iran’s economy is facing at least 10 major and chronic imbalances in sectors such as energy, banking, budget, industry, and even foreign policy. According to these experts, these imbalances are not only the result of inefficient policies but also the product of a governance structure that fosters imbalance. In other words, the country’s economic and political system is designed in a way that instead of solving constant problems, it creates new imbalances. This note addresses the roots of some of these imbalances and then presents a solution to overcome this crisis.
Roots of Imbalances in the Banking and Budget Systems
Iran’s banking system has reached a critical state due to expansionary policies, heavy reliance on central bank resources, and controls outside market mechanisms. The growth of liquidity without backing assets, along with large debts of banks to the central bank, has led to increased inflation. Despite repeated promises to control inflation, these imbalances have not only failed to reduce it but have also kept inflation at relatively high levels.
On the other hand, the budget deficit of the government, mainly due to the decrease in oil revenues and sanctions, has put more pressure on banks and borrowing from them to compensate for the government deficit. This has forced the government to increase taxes and reduce imports of some goods, which in turn exacerbates the recession and creates more problems. This vicious cycle has no way out other than structural changes.
The imbalance structure in pension funds
Pension funds are another imbalanced structure in the country’s economy. These funds, which should ideally have strong financial resources and sustainable investments, have become one of the main factors of budget deficits due to pressure on the public budget and mismanagement. The imbalance between the inputs and outputs of these funds has led to such widespread imbalance that, according to calculations by the Parliament Research Center, the government is forced to allocate nearly 500 trillion tomans annually to cover their deficits. This situation is the result of decisions that have made these funds dependent on the government budget instead of strengthening their financial resources and managing their assets.
Imbalance in foreign policy and trade
Another existing imbalance in foreign policy and trade is one of the important factors that has exacerbated the country’s economic problems in Iran. Different 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 made the economic conditions more complicated.
With the continuation of sanctions and no improvement in international relations, the possibility of reforming economic structures decreases, and these imbalances have more impact on Iran’s economy than ever before. Although the fourteenth government is focusing on improving foreign relations, it does not seem likely that Iran will improve its entry into global markets in the near future due to the escalation of conflicts in the region.
The need for structural reform to overcome imbalances.
As mentioned in the introduction, Iran’s economy has continuously been producing imbalances due to its distorted structure based on monopolies, dependence on oil resources, and inefficiency in economic decision-making. It seems that the only way out of this situation is through structural reforms and changing ineffective economic policies. Reforming the government’s relationship with economic institutions, allocating more space to the real private sector, reducing intervention in market operations, improving transparency in managing public resources, and increasing international interactions are important solutions that can improve this situation.
The necessity of convergence of institutions and public support
Resolving imbalances is not possible solely through technical and economic reforms; it also requires social support and convergence among governmental institutions. Without social backing, economic reforms are doomed to fail. Additionally, coordination among different powers, from the government to the judiciary and other governing institutions, is necessary for these reforms to yield results. For reducing imbalances in banking sectors, pension funds, and budgets, a comprehensive and inclusive approach is needed.
In this regard, the consensus and harmony highlighted in the perspectives of the fourteenth government can be considered as one of the pillars of structural and economic reforms. The consensus and coordination between the government, parliament, governing bodies, and the people enable us to formulate policies in a coordinated manner, taking into account collective interests.
This harmony can lead to a reduction in conflicting interests and an increase in inter-sectoral cooperation, providing a platform where economic decisions can be implemented without creating political conflicts or short-term interests. According to the views expressed in the government, this consensus and solidarity among different political and social groups can be a starting point for effective reforms in the banking system, pension funds, and budget deficit reduction.
