Iran’s Top Clerics Lash Out At Raisi's Economic Policies

As the dollar surpassed 430,000 rials , President Ebrahim Raisi replaced the chief of the Central Bank of Iran and ordered his economic team to come up with ideas to support the collapsing rial. 

Raisi appointed Mohammad Reza Farzin as chief banker. Farzin, who has been the CEO of Bank Melli Iran since last year, was also chairman of the board of Karafarin Bank before that. 

During the cabinet meeting where Farzin was appointed, Raisi stressed the importance of controlling the value of foreign currencies, asking central bank chief to “manage” the situation. 

Since the current wave of protests began in Iran in mid-September the rial has fallen to record lows, losing more than a third of its value against the dollar, fueling inflation of around well over 50 percent. The rial has now lost about 80 percent of its value compared to mid-2021 and close to 50 percent since December 2021. Inflation is also skyrocketing. Food prices have jumped much faster than the overall inflation, with some items registering 100-percent increase in one year.

The impact of rial’s devaluation is still not fully felt in the market, but Iran faces the danger of hyper inflation in the coming months.

On Wednesday, Khabar Online, an Iranian conservative website published an article that said the historic devaluation has proven to be divisive among the country’s hardliners. Hardliners in parliament and some in the military have begun harshly criticizing the presidential administration that they were praising just recently. 

Numerous officials and insiders, including senior clerics are issuing warnings about the rial’s fall that puts people’s livelihoods in jeopardy, but no one is willing to take responsibility.

Mohammad Eslami, the head of Iran's Atomic Energy Organization, said, "The dollar rise and rial’s fall is one of the plots by the Americans," adding that the US wants people to be fed up with the economic hardships so they took to streets to protest.

He was probably referring to tough sanctions imposed by the United States since 2018, when the Trump administration withdrew from the Obama-era nuclear accord known as the JCPOA. The Biden administration held talks with Iran for 18 months to revive the agreement but the diplomatic effort stalled in late August, because Tehran made unacceptable demands, according to Washington. 

Interior Minister Ahmad Vahidi claimed that "There is plenty of foreign currency in the country," a statement which might anger ordinary people even more, who would blame the government for not supporting the rial. 

Professor of Economics at California Lutheran University Jamshid Damooei, described the situation as an unprecedented “economic storm” whose root cause is the lack of confidence in the government’s economic policies. He told Iran International that the majority of the Islamic Republic’s income has always been from selling oil, which has been impeded due to US sanctions. Rial’s fall will lead to higher inflation, which in turn will drag the currency lower, he argued.

As the dollar hit 432,700 rials on Wednesday, the hardliners of the regime have also started rebuking the administration of President Ebrahim Raisi, who belongs to their camp. 

The rial has now lost about 80 percent of its value compared to mid-2021 and close to 50 percent since December 2021. Inflation is also skyrocketing. Food prices have jumped much faster than the overall inflation, with some items registering 100-percent increase in one year.

On Wednesday, Khabar Online, an Iranian conservative website published an article that has been growing among the country’s hardliners. Hardliners in parliament and some in military have begun harshly criticizing the presidential administration that they were praising just recently. The parliament has been pushing to get some explanations for the plummeting currency, but Raisi’s team tries to defend the status quo and their performance, mostly blaming everything on US sanctions, foreign pressures and the international economic situation. 

"The issue of the dollar in Iran is a complex issue,” the article read, noting that the same hardliners who were writing to former president Hassan Rouhani urging him not to blame sanctions for the country’s deteriorating economic situation, now blame problems on popular protests. State media seek to pretend that the reason behind the fall of rial is a foreign conspiracy to foment unrest across the country, . 

Economic analyst Albert Boghosian told Rouydad24 on Wednesday that the situation is very chaotic and no one would want to take responsibility for it. “The government does not view the lifting of the sanctions as important and necessary, and they have no concern at all to free the country from sanctions. The decision makers who are in charge have a more important priority than the people's food table. Therefore, they do not feel alarmed even when the dollar hits 500 or 600 thousand rials.”

Talks to revive the 2015 nuclear deal – or the JCPOA -- and lift most of the US sanctions have stalled since August when the last attempt by the European Union to broker a deal fell apart.

There are also reports that calls to fire the chief of Central Bank of Iran (CBI) Ali Salehabadi are increasing. He has reportedly demanded a three-month opportunity from the president. Salehabadi denied rumors on Wednesday that the government is profiting from the devaluation of the rial. Some argue the government encourages the fall of the rial to sell its dollars at much higher rates and gain more rials to pay salaries and other expenses.

While the rial is in a freefall, Raisi’s government has not even finalized the country's budget for the next Iranian year starting March 21. This can bring more chaos into the economy and government operations..

The economic upheaval comes on the backdrop of the biggest challenge against the Islamic Republic since its inception in 1979. Iran has been rocked by nationwide antigovernment protests since mid-September after a 22-year-old woman, Mahsa (Zhina) Amini, was killed in police custody. She was arrested for violating the country’s forced hijab rules. But since then, protests are coupled with strikes and have turned against the ruling regime, with many Iranians demanding a secular and democratic form of government.

Massoud Pezeshkian, a member of the Iranian Parliament from Tabriz told Didban Iran website that "a large number of people are protesting to the problems in the Iranian society." He added, "These are real problems and that government had better listen to the people's grievances and attend to their demands." Meanwhile he called on the Iranian government to treat the nation compassionately.

He added that the difficulties Iranians are currently facing stem from the government, the Judiciary and the behavior of Iranian clerics. Pezeshkian said, "some 98 percent of Iranians voted for the Islamic Republic in 1979. What have we done in the meantime that so many people have turned away from it?"

In another development of Tuesday, which showed Iran's top officials are still in denial of the country's problems, Iran's President Ebrahim Raisi claimed that everything is in good shape and the country has had eye-catching progress, angering the enemies who instigated the protests in Iran.

Not only the president denied the country is facing a multi-faceted crisis, he also vowed not to have any mercy on protesters and those who stand against the government.

Meanwhile, in an interview with ISNA, which was also carried by several other media outlets in Iran, centrist politician Hossein Marashi said that an association of top clerics who have called for the execution of protesters and amputation of their fingers and toes should apologize to the nation.

Marashi, who is the deputy chief of Iran's Reform Front, hoped that the Association of Seminary Teachers would deny the contents of the statement that called for violent treatment of protesters and prisoners. He said the statement came as a surprise, adding that if this approach continues, it will lead to a form of Talebanism in Iran. Marashi reiterated that statements like this are an insult to Islam.

Referring to previous calls by some officials about holding dialogue with reform-minded individuals, Marashi said that "there is no reason to continue the dialogue under the current circumstances although we generally support the idea of dialogue."

Meanwhile, referring to the statements made by several Friday prayers imams who have accused government's critics of apostasy, Marashi called on the imams to apologize to the nation and pay attention to what the critics say in order to find out a way out of the country's crisis.

In another development, in an article on Etemad Online website, reformist commentator Abbas Abdi warned that a full-fledged economic crisis is going to hit Iranians soon.

Abdi referred to a forecast by the Raisi administration at the beginning of its term in the summer of 2021 about economic growth by 2027. The forecast said that if US sanctions remain in force at the end of the period economic growth will be just 1.7 percent, inflation rate will reach 54 percent and the Iranian rial will fall by 50 percent.

All these have already happened, and it is just 2022.

The forecast, which was generally ignored and was forgotten by even some experts. At the time, the authors of the forecast were accused of portraying a bleak image to force the government to accept to return to the JCPOA, Abdi said.

Abdi noted that the situation is even worse as the government has currently forgotten about its promises to create millions of jobs and build millions of homes. He added that in the best-case scenario, even if Iran returns to the JCPOA, although the situation will look slightly better, overall the future Iranian economy does not look good.

According to Donya-ye Eghtesad daily, the heads of hoteliers’ associations of Yazd and Kerman provinces -- both of which are among Iran's most popular tourist destinations -- are facing a significant drop in foreign and domestic tourism, and a significant part of bookings have recently been canceled.

“Only a few tours have not been canceled but they may also make a last-minute decision not come just as two of the booked tours did not arrive recently even though they had not canceled,” the head of Hoteliers’ Association of the historic city of Yazd, Amir Nasereddin Tabatabaei, said earlier this week. He estimated the number of booking cancelations at around 80 percent.

Mohammadreza Bahrami, Head of the Kerman Hoteliers Association, has also said that his province has lost 90% of its foreign travelers in recent months.

Some countries have advised their nationals not to travel to Iran or asked them to leave the county immediately since nationwide anti-government protests began in Iran three months ago. Iran’s apprehension of several foreign nationals and dual nationals on unknown charges has made the situation more complicated and more damaging to the tourist industry.

In early November the chairman of the board of Iran's Tour Guides Association, Mohsen Haji-Saeed said the regime tourists seen in the wrong places and at the wrong time were seen as spies and that some foreign nationals had been detained only for taking photographs of the protests ““out of curiosity”.

On September 30, Iran’s Intelligence Ministry announced the detention of nine foreign citizens from Germany, Poland, Italy, France, the Netherlands and Sweden. The ministry alleged those arrested had been "on the stage or behind the scenes" of the recent protests.

The delay by the government, which should have submitted the budget bill by December 6 according to the regulations, is reminiscent of the administration of Mahmoud Ahmadinejad who postponed the budget bill until a few months into the year. This means that government departments and organizations were disoriented for a couple of months before they understood how they had to plan their spending. 

According to parliament rules, if the administration misses the December 6 deadline, it must attach an addendum to the budget bill that will earmark the spendings for quarterly portions of the year. This means demanding extra work from an administration that has already failed to perform its ordinary procedural duty.

Quarterly allocations means parliament will approve only three-month budgets, which will tremendously complicate operations not just for government departments but all the businesses owned or controlled by the state, which constitute up to 80 percent of the economy.

Many economic experts are of the opinion that the delay by the administration means economic chaos for at least the first few months of the next Iranian year. Meanwhile, many lawmakers believe that the administration is deferring the decision until the very last minute so that the MPs do not have enough time to fiddle with the figures and are forced to pass the bill as is. 

Parliament approved the broad outline of the current budget in January with a significant number voting against the bill that raised taxes and cut subsidies.

Another reason that may be behind the delay in submitting the budget bill is timing for the country’s Seventh Five-year National Development Plan (2022-2026). Since 1989, the Islamic Republic has been devising five-year development plans for the country. A lot of organizations and institutions are involved in designing and actualizing these plans, which mostly remain on paper, because of they are full of general statements without planning for the needed monetary resources.

For example, “The country should see a rise in the speed of scientific and technological progress and commercialization of their products, while the educational and research systems need to be updated and upgraded over the target period,” reads part of the Seventh Five-year National Development Plan. 

In September, the Supreme Leader outlined the general policies of the seventh development plan and Raisi tasked the Planning and Budget Organization (PBO) to officially start its compilation.

According to the general policies, the 7th development plan’s main goal and priority is economic progress with an average rate of eight percent during the five-year period, with an emphasis on boosting productivity, capital, technology and management. Reforming the structure of the government budget was also among the major policies stressed in the Seventh National Development Plan. The economic policies also call for transformation in the tax system with a view to making levies the primary source of the government’s current budget.

Amid ongoing antigovernment protests, the Islamic Republic’s currency rial has been losing value so much that regime insiders have started passing the buck. Iran’s currency dropped to a new historic low on Tuesday, breaking the 421,000 rial resistance point against the US dollar.