The Corner

Iran Has Many Economic Woes…

… and perhaps the biggest is President Ahmadinejad. Here’s a little comic relief from a country that hasn’t provided much in recent years:

Iran’s moderate press and economists Thursday slammed a decision by President Mahmoud Ahmadinejad to slash interest rates, describing the move as “incomprehensible” and risking “economic suicide.” The rate cut, which economists said could overheat an already inflationary economy, appeared to have been taken without the knowledge of Iran’s economy minister, who had said exactly the opposite just hours earlier.

“Economic suicide for banks,” the Mardomsalari (Democracy) newspaper said of Tuesday’s move. “The economy minister and the head of the Central Bank have to explain this decision since this decree is incomprehensible for economists,” Saeed Shirkavand, economy minister in the previous reformist government, was quoted as saying.

The government spokesman said Tuesday state bank interest rates were being cut to 12 percent from 14 percent and rates at private banks to 12 percent from 17 percent in a bid to create fair competition among lenders.

The former head of the Tehran stock exchange, Hossein Abdo Tabrizi, said “this ad-hoc decision will not benefit the investment market at all and will only terrify investors. They will start to worry that maybe tomorrow there will be such decisions to control and create a price ceiling for shares,” he told the Kargozaran newspaper.

The centrist Ham Mihan daily said that hours before the decision was announced, both Economy Minister Davoud Danesh Jafari and Central Bank chief Ebrahim Sheibani vowed rates would stay the same.

The report goes on to provide some context:

Money-supply growth is running at a huge 40 percent and the government is beginning to implement a gasoline rationing plan that has already seen pump prices rise by 25 percent. […] Meanwhile, about 7,000 students from some 17 universities have signed a petition criticizing an ongoing moral crackdown, saying economic problems were of greater importance, the reformist Etemad daily reported.

Iran’s suicidal economic policies may be the single best hope we have for an eventual denuclearization of the country. Those policies are ruining the prospects for Iran’s long-term economic health while throwing away the current oil windfall. They have begun to generate open hostility to Ahmadinejad within the country’s most powerful elites.

Iran’s hardliners are now clearly on a collision-course with popular expectations of improved economic opportunity. The more unpopular the mullahs become, the more extreme the reaction is likely to be eventually — in the direction of a government that favors free markets and good relations with the West, and is willing to give up a nuclear-breakout capability in exchange.


Mario Loyola — Mr. Loyola is a research associate professor and the director of the Environmental Finance and Risk Management Program at Florida International University and a senior fellow at the Competitive Enterprise Institute. From 2017 to 2019 he was the associate director for regulatory reform at the White House Council on Environmental Quality.