Fair criticism

When the anniversary of Mr. Rouhani's victory in the presidential election arrived many rushed to analyze his performance in the first year of his administration. His supporters and critics forgot to mention that his government has been in office for 10 months and his first year is not up yet. Nonetheless, exchanging ideas is always a necessary part of social dialogue and an exercise in civil society. However reading the critics' analyses one is obligated to remark on the change in the economic environment in Iran, a subject unnoticed by both sides of this exchange of evaluations.
Those who criticize the government policies, particularly those in the legislation, accuse Mr. Rouhani's administration of failing to revive Management and Planning Organization (MPO), populism in continuing cash subsidies, inability to control inflation and ignoring Mehr Housing Projects for low income families. Some also point out the government's failure to remove social network filters and to achieve more in promoting and protecting the freedom of speech in the society. The first group warns that the government has created a wave of expectation and the latter comments on its lack of success in creating jobs and employment opportunities. Neither group takes into account the role of other political groups.
Let us remind ourselves of the macroeconomic conditions of Iran, when Iranians went to the polls to cast their ballots last year. Iran's economy was experiencing new levels of volatility with an inflation rate surpassing 40 percent. Most public accounts were suffering from the lack of fiscal discipline and financial accountability. Rumors had poisoned the business atmosphere in the country. The amount of unpaid loans and default loans had reached a historical record. Iranian banks could not loan money, simply because they had not left any. Their borrowers were not making payments; the circle of credit was broken.
When one remembers those days he asks himself how those in legislation charged with overseeing the government budget and activities failed to act when these events were shaping. As an example let us visit the banking sector in Iran. During the previous administration banks became the instruments of public fiscal policies. The unprecedented oil revenues inspired many schemes. Public officials designed programs to promote business entrepreneurship, to build public housing and to construct new infrastructure. Loans had been made available, and billions of Rials were injected into economy, expanding the monetary base and increasing the inflation. When these loans were not returned, the banking sector began a contractionary phase.
Was there a review of the success of these programs and schemes? Many wonder. Some analysts suggest that these loans were not used in productive economic activities. A large share of the banking credit was spent in real estate speculation and currency exchange market. Iran's economy began to suffer from too much liquidity ready to turn any opportunity into an economic bubble. By the time of presidential election, few had any doubt that extensive economic reforms were needed to address the business uncertainty and economic volatility.
Today the economic environment in Iran is very different. The inflation rate is still high but it has begun to decline. The currency exchange market is relatively stable with its periodic but limited fluctuations. Many are actually considering Iran to be the next big phenomenon in the global economy. Iranian merchants and businesses are preparing themselves for post-sanctions era. The foreign trade is expected to increase significantly. Iran Air has just received the first cargo of technical parts its fleet need, following the agreement in Geneva. The number of foreign tourists is increasing and the economy is reviving.
It is true, that this administration still needs to reform the subsidy program. However it must be noted that the subsidy program was put in place following agreements between the executive and the legislation. The current government cannot change the existing program without Majlis' support and approval. If to continue this program is wrong, that is a conclusion all involved parties have to arrive at. No government can bear all the political cost necessary for economic reforms by itself. To success in such reforms and to sustain them an across the board agreement is needed.
A year after his victory in the presidential election Mr. Rouhani can take credit for reversing a very dangerous course. Iran's economy reached a point very close to the edge, but it was pulled back. Like all other reversals the process will be slow and at some points filled with suspense. The vehicle will not be in an ideal situation, however let's not forget the current president had not been in the driver seat prior to that. To comment on his performance one must remember his achievements are more of a macro nature than a micro one at the moment. Still they are noticeable achievements nonetheless.