Mohsen Safaei Farahani

The Fourth Economic Development Plan had predicted that the country would earn about 90 billion dollars through oil sales. Therefore, Table 8 of the plan had allowed the government to spend 81.6 billion dollars of oil revenues on such executive activities as investment. The Fourth Economic Development Plan had allowed the government to appropriate 33.3 billion dollars to current expenditures.

However, the actual budge shows that according to Table 4 of the Fourth Economic Development Plan, current expenditures of the government should have reached 260,600 billion rials last year and the figure set for the current Iranian calendar year (started March 21, 2007) stands at 290,500 billion rials. However, the budget which was approved by the government for last year stood at 440,000 billion rials. That is, the government has used 170,000 billion rials more than the figure that was initially appropriated.

This year’s current budget should not have exceeded 290,500 billion rials, but it has reached as much as 460,000 billion rials right now and it is not clear where the figure would end up before the year ends. This was only about current expenditures. A glance at the oil sector would reveal that about 43.7 billion dollars of oil revenues have been spent last year and 53.3 billion dollars is to be spent during the current year. In fact, the government’s use of oil resources has reached 107 billion dollars during the past two years.

It should be noted that just two months have passed since the beginning of the current year and we must wait to see where those figures would end up before the year-end. In fact, we have spent 74 billion dollars more than the figure projected by the Fourth Economic Development Plan. I bring an example to show the destructive impact of the government’s way of spending petrodollars.

Assume a family that has earned its wealth through legal means and every two years, one of the family members takes charge of family affairs. Under those conditions, would a single member of that family be allowed to play ducks and drakes with the family wealth during two years of his/her term? Or the main principle of such a family should be to protect that wealth and help the whole family earn more? This is true about our government. Unfortunately, instead of taking good advantage of oil revenues, the ninth government squanders it and uses it to cover current expenditures. Even that is made in an uneconomical manner. I mean, when you have a plan on how to spend that money, nothing bad would happen. But when you simply spend money with no predetermined plan, the results would be catastrophic. We spend more than has been projected by the Fourth Economic Development Plan without gaining proportionate profits.

Yes. Using such mechanism as imports and subsidies, the government has tried to fight inflation. However, measures taken thus far have not been very successful because the inflation is practically rising and the current trend will continue until the end of the current Iranian calendar year. The government could have taken better measures to control inflation, but it did not take such measures and has continued with its past conduct. In this way, the ninth government has practically shown that instead of using oil revenues in an optimal manner, has simply used it to cover current expenditures. Without correcting the fourth development plan’s tables, it has consumed 107 billion dollars of oil revenues.

The Fourth Economic Development Plan had projected oil revenues to total 90 billion dollars in the course of the plan, but now, we have earned 90 billion dollars in 17 months alone.

This behavior was also in violation of the Fourth Economic Development Plan. If we converted that figure into rials, it would amount to the figure that minister of economic affairs and finance announced in his farewell speech. If you converted 107 billion dollars into rials, you would see why inflation has taken up such a rapid pace. I think that the government had no plan on how to use that money while there was the Fourth Economic Development Plan and the government was obliged to follow suit with that. The Majlis (Parliament) was also obliged to approve the annual budget bill according to the fourth plan, but the legislative did not fulfill its task and violated the law. The government also overlooked the parliament’s violation.

Now the people are suffering the consequences. If we had corrected the Fourth Economic Development Plan act, we should have implemented it. If we had implemented the corrected plan, we could have still saved a lot at the Oil Stabilization Fund. In this way, the OSF would have turned into a major support source and a national asset. Since 1950, when the oil industry was nationalized, we considered it a national asset. In fact, we are not entitled to use that asset without any well-defined plan. We must use it to achieve economic development goals. It would end anyway, but the government is spending it in a way as if it would never end.

The assets of all countries belong to all generations and we should have taken advantage of a method to keep that asset for future generations. However, the ninth government has not done that. That is, we could have credited 70 billion dollars to the Oil Stabilization Fund during 2007 and 2008 and part of it could have been appropriated to the private sector. Unfortunately, it was wasted and led to no economic development. Those resources can be self-regenerating. In this case, we could have achieved the 20-Year Perspective Plan’s goals to make Iran number one government in the region. However, this did not happen. We could have achieved a higher gross domestic product and an economic growth rate of well above 8 percent. Then we could have claimed that our country is number one economic power in the region. At the same time, we must not forget that our country is experiencing very sensitive conditions.

Since 1990 when the former Union of Soviet Socialist Republics was disintegrated, Caucasus and Central Asia were major geographical domains in the north of our country and every one of those regions could have held promises for our economic activities. Those areas are landlocked and Iran is the best route for them to access international waters. However, we did not even use our oil revenues in favor of our geopolitical interests and failed to come up with a new definition of those interests.

The railroad, which is to connect Qazvin to Rasht, is progressing very slowly because needed funds are not supplied on time. On the other hand, we could have turned gas resources into electricity and improved our security in the region. Countries like Turkey and Pakistan need electricity. If we had used our resources to produce more power and export it, we could have defined new geopolitical interests for our country. In that case we could have improved security of the region for our country and other countries. If oil and gas pipelines of those countries as well as their transit routes passed through Iran and we also supplied part of their power, they would have attached great importance to our country. In fact, this would have led to regional solidarity among neighboring countries. However, we failed to use our capacities and high oil prices failed to help us to do that.

Some analysts have pointed to this fact. However, we must note that, firstly, as I said before, oil revenues started to rise after 1973. Therefore, we had oil for more than 60 years, but that oil did not help our economy thrive. The civil society did not thrive too. That is, no positive effects of oil could be seen in the Iranian economy and if there were positive effects, they were very limited. There were no signs of civil society yet. That is, without oil revenues, we were ruled by dictatorial governments and even now, the government may think that it does not need people on the strength of oil revenues. This reality can be clearly seen.

Even now, high oil prices have not been distributed in such a way as to build up popular backing for the government. Even the opposite has occurred. That is, absence of suitable plans has created major problems for the country and the lower social classes are under tremendous pressures. What I want to say is that, existence of civil society does not have anything to do with presence or absence of oil revenues. When people earned less than 300 dollars, there was no civil society and now that per capita income has increased, there is still no civil society. I think that political structures of a country are not derived from that country’s revenues. It is the structure of the government that leads us toward establishment of civil society.