Sunday 19 Aug 2018 | 07:51 | SYDNEY
Sunday 19 Aug 2018 | 07:51 | SYDNEY

Iran getting it right, says IMF


Sam Roggeveen


30 June 2011 09:13

As a no-more-than occasional observer of Iranian politics, this news in the latest issue of The Economist came as a bit of a shock. The IMF, it seems, is deeply impressed with Iran's recent round of economic reforms:

The reason for the praise is Iran’s exemplary execution of a task dear to the IMF’s heart: structural reform. The Islamic Republic describes things differently. Speaking on the occasion of Nowruz, the Iranian new year in March, the supreme leader, Ayatollah Ali Khamenei, declared this to be the “year of economic jihad”. Whatever its name, the sweeping reform of a ruinous, three-decade-old system of state subsidies that Iran began last December seems to be radically reshaping the country’s economy for the better.

Not only has it relieved the government of a huge financial burden. It has slashed local energy demand, reducing chronic pollution and leaving more oil for export. It has dramatically raised disposable incomes for the poorest without placing extra burdens on the rich, spreading social equity while boosting consumption and bolstering the banking system. In future, Iran’s subsidy reform may even be seen as a model for top-down social change...

Read on for a description of how the Government not only enacted a brave reform — which quadrupled bread prices and increased the cost of diesel by 2000% — but also skilfully avoided public protest through a simple and well-designed compensation package for citizens. There's also a political payoff for President Ahmadinejad, who has embraced one of the Green movement's sources of discontent, thus robbing it of a protest issue.

The kicker is that, according to The Economist, 'it may have been international sanctions, intended to punish Iran for its suspect nuclear programme, that at last persuaded its opponents of the need to scrap subsidies.' (Though the NY Times disagrees with this interpretation.)

Pessimists might wonder what took Tehran so long. After all, as The Economist makes clear, Iranian politicians have been debating this issue for decades. On the other hand, this news does shake one's comfortable complacency about Iran's politics. We've got used to the idea of a blustering, bloviating, bombastic Iranian Government. But an economically competent Iranian Government? That's a more challenging proposition.

Photo by Flickr user seier-seier.