Spiraling Inflation Can Fuel Further Social Unrest in Iran
The administration’s financial policies continue to drive the inflation rate and force financial institutions into bankruptcy. Iranians are no strangers to living with high inflation rates, but the further loss of purchasing power can exacerbate Iran's current social unrest.
In their most recent reports, government-owned banks disclosed a high number of accumulated losses on their annual balance reports. As the major stakeholder in Iran’s economy, say experts, the government has to cease meddling in economic regulation and surrender to market forces. Non-viable state-owned banks continue to report losses on annual financial reports, while the main customer for their finances has been the government itself. Moreover, by capping bank interest rates at a significantly lower level than the inflation rate, the administration contributes to the banks’ losses while keeping its own financing costs low. The failure of the banking system is not the only outcome of the government’s direct interference in the official economy, as one of the consequences of banks’ low-interest rates is the depreciation of the rial. Talking about possible ways out of the current banking crisis in Iran, analyst Abolqasem Hakimian highlighted the effective strategies of the Russian Central Bank in controlling liquidity and maintaining the ruble's value during the Ukraine war crisis, such as by raising the interest rate. In Iran, the factors contributing to the growth of the FOREX rate are the exponential rise in liquidity, the depreciation of the rial, social unrest, and high inflationary consumer expectations. Criticizing policies that have resulted in the high FOREX rate, Alireza Manaqebi, president of the Supreme Assembly of Importers, points to bankrupt industries, the outflow of capital, and high unemployment as the consequences.
PersuMedia’s AI sentiment analysis of Persian Twitter accounts reveals a 42-percent rise in negative sentiment about Iran's economic conditions during October 2022.
?The rise of the FOREX rate has always driven the economy into a chain of cascading events with high inflationary pressure, noted businessman and economic expert, Pedram Soltani. This new round of inflationary pressure in a society with one-third of its population under the poverty line has raised concerns among Iranian experts about the exacerbation of social unrest. Economist Farshad Mo’meni implicitly compared the state of affairs in Iran to the last years of the Soviet Union, and philosopher Bijan Abdolkarimi warned about people “in the gray area” joining the protests in response to deteriorating living conditions.
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