President Ebrahim Raisi presented Iran’s Seventh National Development Plan before the Parliament in early June, after the body had made minor revisions to the plan. But critics say the plan is over-ambitious as it glosses over Iran’s deteriorating economic conditions.
Experts are alarmed by the plan’s cash flow projections, 10 times higher than what the country can actually generate. The plan envisions a budget equal to $1,200 billion, and if this plan is to pick up, Iran’s GDP must grow by 46.9%, oil exports by 79.4%, imports by 111.8% and non-oil exports by 177%. Current predictions for Iran’s imports after two years only stand at 16.2%, and growth in the non-oil sector at 22.6%.
Tehran claims it is monitoring growth indices, and that the country experienced 4% growth last year in the industrial sector alone, hence the need to allocate more to trade zones and industrial complexes. It also envisions investment growth rates of 22.6%, annual employment growth rates of 3.8% or the equivalent of a million jobs a year, and the inflation rate reducing by almost 10%, which is already under-reported. According to official accounts, the inflation rate will drop to nearly 9% from 19%, but experts say that the rate is actually 10 times higher than what is reported officially.
Consequently, it is unclear how Tehran will maintain control over the economy despite the new development plan. Iran’s Pension Fund, for example, which covers 25 million retirees and pensioners, is in crisis. This means that even modest revenues generated by the new development plan would have to first cover massive state debt to pensioners. The Armed Forces Social Security Organization and the Social Security Organization of Iran also face bankruptcy unless the Iranian government replenishes their funds.
The Central Bank of Iran’s macroeconomic indices meanwhile negate findings by Iran’s Statistical Center, and the two bodies disagree on what the actual GDP of the country is. Not surprisingly, constant fluctuations in the price of basic commodities, including many food items, are causing severe economic hardship.
Despite these harsh truths, Iran’s new budget bill has increased budgetary allocations to the armed forces, the IRGC and the Basij. Approximately, an extra $52.2 million is allocated to the aforementioned, in addition to other state-sponsored allocations. Hence, much-needed funds are diverted away from the Iranian people to finance Iran’s military-security establishment.
Additionally, profit-driven contractors will receive preferential deals to manage environmental programs that the Iranian government should ordinarily supervise under the new development plan, thereby opening up the possibility of greedy investors plundering Iran’s remaining natural resources. The development plan even slashes legal recourse by doing away with environmental laws that previously protected public lands.
Economists fear Tehran might increase taxes under the plan. They warn of economic collapse if this happens. The plan is also anti-labor as it protects investors. Most workers are unlikely to receive even half of the minimum wage and business owners will be able to hire young people and those who are disabled at half the lowest minimum wage rate, and fire them without any compensation. Guilds and labor unions say this unfair policy will lead to the exploitation of the work force.
The plan aims to build fiscal discipline, fix the high inflation rate and trigger sustainable growth, but it ignores key sectors such as Iran’s health sector. It lacks, for example, a vision to implement a comprehensive national health program despite the fact that Iran’s current national health insurance and social welfare plan is fiscally in shambles. Additionally, a focus on rapid privatization of the health sector, as envisioned by the plan, will bring more expertise to urban areas but neglect critical health indices in smaller towns and rural areas. The need for generic pharmaceutical production to help lower the cost of medicine is ignored in the development plan, thus enabling a select group of private companies to monopolize the Iranian pharmaceutical market.
Finally, there are two other major problems with the latest development plan. While Tehran is encouraging population growth, there are no new plans to offer needed incentives for families to grow despite economic hardships. The plan further ignores the need to restore archeological sites and preserve Iran’s cultural heritage and promote tourism except for revenue generating purposes.
There are calls to revise the plan but the Raisi government seems intent on proceeding forward; in addition, President Raisi has failed to respond to the accusation that his plan is opaque and non-transparent. Critics insist the plan borders on delusional as it fails to take into consideration Iran’s economic and geopolitical contexts, particularly its lack of investments, economic mismanagement, extensive corruption and tough sanctions.