Signs that the government may be running out of money have multiplied in recent months. Tens of thousands of civil servants, including school teachers, have not been paid since January. Bills from private contractors working for the government are piling up, threatening the survival of many businesses.
The key oil industry, which accounts for more than 75 per cent of the government’s income, is being starved of cash. Efforts to attract some $15 billion in foreign investments in the oil and gas industries have borne no fruit. Foreign investors are wary of violating United Nations sanctions or running afoul of the US Treasury’s plans to put the financial squeeze on the Islamic Republic.
All this may seem surprising if only because Iran has earned almost $150 billion from oil exports since Ahmadinejad won the presidency in 2005. So, were did the money go?
Part of the answer lies in the hike in inflation rates. According to the Central Bank of Iran (CBI), monthly inflation rates since January 2006 have varied between 2.8 and 3.2 percentage points, making for an annual rate that could reach the 30 per cent mark next year. Theoretically, in an oil-based economy the government has a built-in interest in inflation. The problem, however, is that Ahmadinejad has presided over a massive increase in public expenditure. Part of this is due to an estimated 21 per cent rise in the budgets of military and security services in preparation for a war with the United States.
Another big expenditure item is the ever-lengthening list of handouts by Ahmadinejad during his tours of the provinces - mockingly known as “The Ruin the Economy Road Show”.
According to estimates, some $10 billion has been pumped into pork-barrel projects that often fuel inflation further. Ahmadinejad has also increased expenditure on his so-called “exporting the revolution” programme. Syria has received almost $3 billion in cash and cut-price oil. The Lebanese branch of Hezbollah has been rewarded with $1.8 billion while the Palestinian Hamas movement has collected almost $1 billion. A further $3 billion has been spent on financing anti-US political and armed groups in Iraq and Afghanistan.
The government has also made provisions worth $4 billion to cope with emergencies in its quest to dominate Iraq in case the Americans run away.
The biggest rise in public expenditure, however, has come from increases in imports, as the government tries to stockpile “strategic goods” in anticipation of war with the US.
Iran buys more than half of its food and some 42 per cent of its gasoline from abroad, and is now busy importing as much as it can to beat future sanctions.
To me this is scary. Sure, it is good that Iran is spneding its way to oblivion. But what if Ahmadinejad figures it just doesn't matter?
What if Iran plans for war in the end times that make mere wordly debt irrelevant?
Ahmadinejad declared war in his way already. When does he strike?
Is Iran going for broke?
