Oil Revenues Are Alarming, Economists Warn Ahmadinejad

Fariba Sarraf - 2007.07.16
Rooz Online

A group of Iranian economists warned President Mahmoud Ahmadinejad that “oil revenues are alarming, and the government must not increase expenditure simply because revenues have increased.”

The same group of economists wrote a letter last year to President Ahmadinejad criticizing his government’s economic policies. Last month, they published a second letter calling on the President to “review the administration’s economic policies” and “take a fundamental step towards improving the nation’s economic conditions.” In response to that letter, individuals affiliated with the administration accused the economists of engaging in “politicking” and even fabricating data.

According to E'temad Melli daily, however, “After reviewing the letters, officials in the administration decided to invite the economists to the President’s office in order to discuss their concerns.”

In that meeting that lasted more than 5 hours according to a report published by the Iranian Student News Agency [ISNA], economists argued that the country was experiencing a second Dutch Disease as a result of the administration’s expansionary fiscal policies. They also raised their concern about the state’s increasing oil revenues in the past two years – exceeding 120 billion dollars – telling the President that they were worried about “losing an unprecedented opportunity.”

One of the economists present in that meeting, Zahra Karimi, told reporters, “It seemed as if Mr. President only wanted to say that our criticisms were not fair, and that his administration’s performance fares much better compared to that of previous administrations. He said that he looks forward to new data that will prove his administration’s claims.”

Sarmaye, a daily published by one of the disgruntled economists, Hasan Abdeh Tabrizi, quoted an economist present at the meeting – Dr. Meidari – as having said, “oil revenues are alarming. Oil is ominous and the government must not increase expenditure simply because revenues have increased.”

The Donyaye Eghtesad [“World of Economics”] publication quoted another economist present at the meeting: “It appears as if the administration regards two important financial institutions as obstacles facing the implementation of its desired policies: one is the Budgetary Management and Planning Organization of Iran, which oversees planning and budgetary procedures, hence controlling the allocation of resources among public institutions; and another is the country’s banking system, which plays a fundamental role in distributing funds to private and public firms. Perhaps these two institutions, the Budgetary Management and Planning Organization and the banking system, have not performed their duties as well as they should have given the country’s special economic conditions; but we do not approve of the government’s treatment of them either. With this kind of treatment, the country’s financial conditions will worsen even more.”