Money Exchange with the World

Domestic and foreign policies of Iran have been subject to ill decisions and lacked harmony over the past eight years. Iran edged closer to the sanctions every day, while the economic sector moved towards heavy dependence on oil revenues and imports.

Seven rounds of Astana Economic Summit in Kazakhstan prepared the ground for an Iranian delegation to elaborate on its economic policies with more transparency and reassure foreign investors of the revival of economic stability in Iran while stressing on the lower impact of the sanctions on the country’s economy and transactions. Iran Daily Newspaper had an interview with Ali Tayebnia, the Minister of Economic Affairs and Finance during the course of Astana Summit as follows.

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The economy of resistance has been brought under the spotlight by various sectors and industries. It is widely believed that implementing the said policy will effectively lead to economic development of the country and thus, we may move away from the present stagflation ruling over the country. What is the approach of the ministry of economy towards the economy of resistance?

Unfortunately, domestic and foreign policies of Iran lacked harmony over the past eight years. Iran edged closer to the sanctions every day, while the economic sector moved towards more dependence on oil revenues and imports. To sum it up, it all translated into more vulnerability with regards to the sanctions and global intimidations. As a result, by the time the imposed sanctions were heavily implemented, the country sunk deep into inflation and economic stagflation. Inflation rate skyrocketed to over 40 percent and economic growth rate was estimated to be around -6.6 percent in 2012. This hard and bitter experience showed that we need to minimize the impact of economic shocks, both inside and outside the country. This was the starting point for the economy of resistance. The general policies and regulations of the economy of resistance were defined and ratified, thanks to the efforts of economic experts as well as conducting grand economic pathology. I assume that the economy of resistance is one of the more realistic approaches towards dealing with economic obstacles and challenges in Iran over the past few years. This new concept can also be seen as a way out of stagnation and reaching a situation in which economic shocks are controlled and their damage and negative impact minimized.

Don’t you consider the goals of the economy of resistance too good to be true?

Absolutely not. On the contrary, it is a very practical and operational approach. The agenda of the economy of resistance comprises operational phases. The emphasis is on increasing the government’s tax revenue in budget and every detail is planned around this notion. The economy of resistance has been announced to the subdivisions of the ministry of economy and its implementation is under constant supervision. We need to take advantage of all international potentials, one of which is foreign capital and investment.

We are still under the sanctions. How can we attract foreign investors and their capital?

Fortunately, our global status and reputation is on the rise. World powers have well understood that the new Iranian administration strictly adheres to peace-seeking protocols. The sanctions are yet to be lifted completely and we already see a long list of foreign delegations travelling to Iran to explore investment opportunities in near future. The sanctions have cracked and its pieces cannot be glued back together.

But the transfer of money is still a big issue.

We are confident that it can be dealt with considering the positive progress of international negotiations. Expectedly, there were some ups and downs in this regard, but we are very positive about the future. In fact, we are in a much better economic condition compared to a year ago and the transfer of money to all countries is virtually possible at the moment.

You spoke of improved economic conditions.

Yes. I need to stress that the transfer of money will no longer be an issue in the near future.

Let’s discuss regional cooperation. Do you believe that collaboration with neighboring countries will help us overcome economic challenges more quickly and more effectively?

Iran is the biggest and the most pivotal nation in the region and neighboring countries have realized the remarkable role of Iran in maintaining peace, growth and development in the Middle East. As a result, we hosted a number of high-ranking foreign officials in the past few months. Many neighboring and far-off countries are willing to compete in Iranian markets. A great deal of investors have acknowledged that Iran is presently the most secure region for investment in the Middle East and the most stable economy despite the sanctions. The situation is very promising in general and our relation with the neighboring countries is on the road to recovery.

What is the position of the private sector?

It seems that the new Iranian administration has won back the trust of the private sector. Iranian companies and investors are positive about the new policies. Trust can be the cornerstone of the private sector’s stronger participation in economic plans and projects.

With the negotiations on the right track, we were expected to see a significant boost in trade transactions. How is our relation with Europe going?

Our top priority is developing relations with neighboring countries. As a matter of fact, our relations with Middle Eastern states had tainted. For example, the volume of our transactions with Pakistan is currently around $600 million, while we always maintained our transactions with Pakistan above $3 billion in the past. Terms have been agreed in order to boost the volume of transactions as much as before. Such markets are far more suitable for Iranian technical and engineering service exporters. Of course there are only a handful of opportunities for Iranian contractors, but that does not mean that we have turned a blind eye on European markets. Our relation with Europeans is still under the shadow of the imposed sanctions. Gladly, we have improved relations with the West despite the sanctions. French auto makers travelled to Iran and met their counterparts for further negotiations over the past few months. We have had positive developments in other areas as well. Banking industry was another prosperous sector since the arrival of the new Iranian administration. It is not to mention that we cannot come to terms with the West on all subjects overnight, but this is a rather gradual procedure.

What are your plans for fighting stagflation that has cast shadow over the country for quite some time?

We have set sight on reaching economic growth of 2-3 percent in 2014. Unfortunately, the country’s economic growth in 2012 was -6.6 percent, while some analysts believed that to be around -8.5 percent. Ultimately, Central Bank announced a certain number of -6.6 percent after thorough analyses. Statistics about economic growth of 2013 is yet to be announced, but our early projections suggest that the growth will be negative for another term and the absolute number has sharply dropped to be around zero. The government is chiefly focused on boosting the private sector. We are confident that by clinging on to infrastructure and potential of the government fed by oil revenues, we will most certainly be able to reach and maintain constant economic growth and stability. Policies of the economy of resistance put emphasis on taking advantage of national potentials as well. Thus, revitalizing the private sector, enhancing business environment and winning back the trust of investors are on top of the government’s agenda. We also need to allot economic firms to real players in the private sector and minimize the government’s role in making decisions in economy.

Does the anticipated 3-percent economic growth include the statistics and impacts of the second phase of targeted subsidies plan?

Yes. Targeted subsidies plan does not affect the growth dramatically. The growth rate is estimated by a number of economic policies and indicators. If the government executes the targeted subsidies plan properly in the future, productivity and efficiency will definitely enjoy huge boost. Increasing the prices of energy carriers is part of the government’s general policies and increasing efficiency is the principal objective. Targeted subsidies plan will undoubtedly lead to economic growth.

Do you believe that the 11^th Iranian administration will maintain the declining rate of inflation? Can you reduce it to a single digit?

Possibly yes. We’re confident that this will happen, although we cannot expect to curb a long-lasting inflation of 45 percent in a short period of time. The inflation rate has been on the downhill for the past eight months. The alarming 45-percent inflation rate has decreased to 4.17 percent step by step and we’re hopeful to maintain the declining fashion. Of course it takes well-thought-out monetary and banking policies and strengthening international ties to do so. Controlling the inflation rate is one of the pillars of the economy of resistance.

Translated by: Ali Arsalan Shahla

Note: This Article was first published in Tejarat-e-Farda magazine.