When President Ebrahim Ra’isi came into office in the summer of 2021, most observers noted that his economic team comprised a motley crew with different understandings and approaches to economic policy. Ehsan Khanduzi, the minister of economy, became an early target for impeachment by the Majles due to his perceived incompetence, until talk of further impeachments or loss of ministers in the Ra’isi cabinet came to a sudden halt. Now, however, speculation is heating up again that he may be on his way out as the administration continues to contend with the country’s economic decline.
The proximate reason for a clash between Khanduzi and Mohammadreza Farzin, governor of the Central Bank of Iran (CBI), is a difference over monetary policy, with the former preferring to keep things loose and the latter wanting greater discipline. The CBI’s recent move to offer low-risk one-year CDs at a dividend rate of 30 percent has proven attractive enough to encourage investors chafing under the new tax structure and concerned over the price-to-earnings ratio to pull their assets from stocks and buy up the CDs instead. It has also put the brakes on a rise in the FOREX rate. As an official primarily interested in the health of the stock market, Khanduzi intervened to declare a moratorium, but the CBI countered confidently, asserting not only that the offerings would be extended to other areas in need of economic stimulus but that it would be up to the CBI to announce the administration’s monetary policy. Farzin’s primary concern is to rein in runaway liquidity, whereas Khanduzi wants an excess of it as a way to close the administration’s budget gap. An op-ed in the economic news outlet Jahan-e San’at suggests Khanduzi is largely clueless about economic discussions and decisions within the administration and that perhaps it is time for him to go. Calling Khanduzi a “good man”—a common formula for damning someone with faint praise—the hardline Asadollah Badamchian, an old bazaar hand and a senior member of the Islamic Coalition Party, identifies the minister of economy as ineffective and somewhat ignorant, especially in his handling of FOREX.
Yet another member of the administration’s economic team seems to have made his position shaky by issuing a false statement. Davud Manzur, the man who came in to replace the ineffective Mas’ud Mirkazemi as head of the Plan and Budget Organization, made the questionable claim that Iran’s is the 19th largest economy in the world. (In fact, it is Turkey that occupies that position.) This is closer to the truth than the position of 8th in the world that Supreme Leader Ali Khamenei had blundered into declaring but still quite far from reality. Manzur’s explanation seemed muddled, relying as it did on pronouncements by unnamed international institutions. As businessman Peiman Mowlavi notes, had Iran ranked anywhere close to those figures, it would have to be included in the world’s G20 discussions. In any case, he asked, what difference does it make whether Iran ranks 19th or first when the average Iranian consumer cannot make ends meet? In terms of economic freedom Iran is on par with nations like Zimbabwe and Sudan. In Mowlavi’s view, Iranian officials use such inflated assessments to make themselves look good and to feed their sense of self-importance. “Islamic” economist Kamran Nadri concurs, noting that officials cannot will the numbers to reflect what they want. Former labor rep Hasan Sadeqi warns that sooner or later the country will have to pay for the economic incompetence of officials, not only in the administration but also in the Majles.
