On the other hand, the growth of the monetary base (with an annual average of more than 26%) — a major cause of which was the Central Bank’s purchase of oil revenues — led to macroeconomic instability and persistently high inflation rates of above 20%. The macroeconomic instability ultimately led to market turmoil and severe fluctuations in housing prices and foreign exchange rates from 2011 to 2012.
During these two years, the exchange rate tripled and there was an 80% increase in housing prices. This bitter experience has led to a consensus among high-ranking officials that there is a need for a new paradigm in terms of management of the economy so that Iran can succeed in the face of intense global competition.
After the conclusion of the July 14 nuclear deal with six world powers, Rouhani tried to clarify the features of this new paradigm for both domestic and foreign audiences. And now, the supreme leader has also discussed this issue for the first time, after the conclusion of the nuclear deal, and endorsed the new paradigm. Some of the features of the latter were highlighted in Khamenei’s meeting with the Cabinet. They are as follows:
- Macroeconomic stability and reduction of the inflation rate to below 10%.
- Managing foreign trade and preventing Iran from becoming a market for foreign goods.
- Increasing non-oil exports.
- The necessity to increase Iran’s presence in global markets and emphasizing the point that if a country is present in Iran’s market, Iran, too, shall have presence in that country’s market.
- Reducing oil dependence and developing other capacities such as mines.
- Emphasizing the pivotal role of the private sector in the economy.
- Transferring governmental development projects to the private sector.
- Achieving the goals of the “resistance economy.” About a year ago, Khamenei delivered the general guidelines of the resistance economy to the heads of the three branches of government (president, speaker and judiciary chief). An important feature of these policies is their emphasis on exports and connecting Iran’s economy to the world. The following are some of the specific policies proposed by the general guidelines:
- Planning national production in accordance with export needs.
- Encouraging foreign investment for export.
- Developing economic diplomacy.
- Developing production capacities and oil and gas exports in order to have an influential role in the global market.
- Completing the value chain of the oil and gas industry and developing oil and gas derivatives exports.
- Developing the free trade and special economic zones’ capacity in order to transfer advanced technologies, expand and facilitate production and export of goods and services, as well as provide the required financial resources from abroad.
- Preparing domestic firms for intelligent exposure to global trade regulations in a gradual and goal-oriented process.