Four Cabinet Ministers Warn of Economic Crisis

In a letter to their boss president Hassan Rouhani, four cabinet ministers talk of some of the harsh realities of the Iranian economy and warn that unless actions are taken over them, the current depression will turn into a crises.

The letter, written by the ministers of economy, industries, labor and defense, talks of rising foreign exchange rates, fall in the stock market, decline in demand and other issues. Parts of the letter read, “While the nuclear achievements in the country have brought a prominent position for the country with much positive economic consequences to come in the future, there is evidence of decline in market demand because of the expectation that prices would fall. The expectation that with influx of foreign capital there will be new and greater competition between local companies and foreign ones, something has already created a challenge for domestic industries. This must be addressed through transparent measures. Some domestic companies have already shut some of activities in the capital market. While financial resources have gone up by 17 percent in the first three months of this Persian calendar year compared to last year, they have not matched rising company expenditures and costs which rose by 22 percent this year (6,600 billion Toman last year compared to 8,100 Toman this year), which reflects the increased interest rates this year. Available banking resources stand over 700,000 billion Toman while the share of public companies stands at less than 7 percent of this.” (The market value of the US Dollar in Iran stands at about 3,500 Toman.)

The report continues, “The falling market value of companies that are active in the capital market could be because of a drop in demand for their goods, difficulties in engaging in economic activities and rising inventories in various industries. As an example, in the auto industry, books indicate losses to stand at 4,200 billion Toman while because of liquidity crisis, the industry is under threat of completely stopping all activity, while there are over 100,000 vehicles in their inventories. The same situation where there is greater supply and lower demand exists in the steel, copper, housing, cement, ceramics and tiles and mining industries. In the petrochemical industry – which occupies over 35% of the total capital market – the unclear policies of determining the price of gas (as the primary feed for the industry) and the rising value of the Dollar, helps in depressing this industry. In addition, the control of prices on products produced by some public companies (in the stock market) are adding to the imbalance between revenues and expenditures.”

This letter, which was written on August 24, was initially made public by the government’s official newspaper, and it received wide media coverage. The minister of economy Ali Tayebnia told reporters that the letter was discussed at the cabinet in the presence of president Rouhani following which specific recommendations are to be presented to the cabinet.

It is noteworthy that last year, Rouhani publicly announced in Mashhad that the economy was no longer in a state of depression, which not only contradicts the presentation made by these four cabinet ministers but who even warn of an impending crisis unless corrective measures are taken.

http://www.roozonline.com/english/news3/newsitem/archive/2015/october/06/article/four-cabinet-ministers-warn-of-economic-crisis.html