Why do we sell today's dollars just in case? / Ofeke's warning: We are harming the country with the "we have currency" gesture

A member of the academic staff of Ahvaz University, rejecting the prediction of the two-week collapse of Iran's economy as a result of foreign pressures, believes that the country's economy still has the capacity to resist. However, the continuation of the maritime blockade and disruption of oil exports can severely limit this ability. Why do we sell today's dollar post today? / Ofeke's warning: We are harming the country with the "we have currency gesture" appeared first on Safir Arjan.

According to Ambassador Arjan, Iran's economy is struggling with point-to-point inflation of nearly 90% and double-digit negative economic growth, and the restrictions caused by the maritime blockade have also made the prospects of the country's foreign exchange earnings uncertain. In such a situation, both assessing the ability of Iran's economy to withstand external pressures and examining the effectiveness of internal policies to contain the crisis become doubly important.

Morteza Ofgeh, economist and faculty member of Ahvaz University, rejecting the prediction of the rapid collapse of Iran's economy as a result of external pressures, believes that although the country's dependence on oil revenues and its vulnerability to economic blockade cannot be denied, it cannot be expected that an economy of this size will collapse completely in a short distance due to a series of pressures.

In a conversation with Ambassador Arjan, he said, "This is not a principled behavior. Our dependence on oil sales and our vulnerability to the blockade are undeniable, but it makes no sense to predict that the country will collapse in two weeks. Countries don't collapse like this, and our economy was not in a position to undergo a fundamental disintegration with these kinds of pressures in this short time."

According to Ofeke, in order to evaluate this prediction, it must first be determined what is meant by collapse. If the meaning of this term is the overthrow of the political structure and the disruption of the established order, according to his belief, the groundlessness of such a prediction could be recognized from the time of its design.

Referring to the remaining capacities of Iran's economy to deal with external pressures, this economist adds: "Our economy has capacities that are resisting despite this great pressure. "The capacity of our economy is still enough to avoid the so-called collapse and collapse."

Ofeke also suggests that the country has undeclared reserves or that the ability to produce and provide economic resources is more than pessimistic estimates. However, in his assessment of the current situation, he emphasizes that having the capacity to resist does not mean that Iran's economy has unlimited ability to withstand more pressures.

currency dependence on oil; The vulnerable point of Iran's economy

This economist further considers the oil export disruption as one of the most important current challenges of Iran's economy and believes that the continuation of maritime restrictions can severely affect the country's ability to provide foreign exchange.

Referring to the significant contribution of oil sales in providing the currency needed by the country, he says that the sea blockade has seriously disrupted the oil export process. According to the assessment of the horizon, in the current situation, the volume of oil exports has decreased to a great extent, and this situation is considered a difficult issue for an economy that is still highly dependent on oil revenues.

In this regard, Ofeke says: "In this situation, the foreign policy maker has no power except to defend and reduce the problems. That is, we cannot expect the currency policymaker to solve the problems, but we can expect him to at least reduce the severity of the problems."

From his point of view, the current restrictions on foreign exchange earnings have reduced the scope of maneuver of the policymaker. In such a situation, currency policies cannot necessarily solve the structural problems of the economy by themselves; But the way of managing available resources can play a decisive role in aggravating or alleviating economic pressures.

Ofeke's criticism of Hemmati's foreign exchange policy; The currency shock started before the siege

In another part of this conversation, Ofeke attributes part of the price jumps and weakening of the value of the national currency to the previous currency policies and criticizes the performance of Abdul Nasser Hemmati and the proponents of the exchange rate liberalization.

He believes that the liberalization and single rate of the currency, in a situation where Iran's economy was facing serious restrictions, caused more pressure on the currency market. According to this economist, not all currency problems can be attributed to developments caused by maritime blockade and foreign pressures; Because the process of increasing the exchange rate started months ago.

Criticizing what he calls the destructive role of the foreign exchange policies of Hemmati and his associates, Ofeke says that these policies have led to an unprecedented weakening of the value of the national currency, and their supporters are still unwilling to accept responsibility for the consequences of their decisions.

He emphasizes that the flaws of these policies were predictable from the beginning and various experts had warned the policymakers about the dangers of implementing such an approach before its consequences fully emerged.

Explaining the chronological order of the factors affecting the price increase, this economist says that until July, the currency shock of January was the main cause of price jumps in the country, and from July onwards, the pressures caused by the war and sea blockade added to the problems.

In this way, from the point of view of Ofeh, although foreign developments and restrictions on oil exports play a role in aggravating economic problems, the contribution of domestic policies in the formation of the current situation cannot be ignored.

Oil on water is no longer a reliable support

In the following, Ofeke points to foreign currency sources obtained from oil sales, which were previously in transit or in oil tankers, and according to him, they provided part of the country's foreign exchange needs for a period of time.

He says that between the signing of the Islamabad agreement and the resumption of the conflict with America, about 80 million barrels of oil were on the water, the sale of which could generate income for the country. However, according to him, these resources are now at a minimum and the income from these shipments cannot be counted on as a reliable support.

The reduction of these resources, along with disruption of oil exports, can put more pressure on the currency market; Especially if the trade restrictions continue and the return of export earnings is also difficult.

From the point of view of Afgeh, the main issue in this situation is not only the amount of foreign exchange resources available, but how to use these resources and maintain the possibility of meeting the country's essential needs in the coming months is also important.

Selling 2 billion dollars of currency to people; A risky policy in the context of limited resources

One of the main points of criticism of Ofeh is the recent decision to allocate 2 billion dollars in currency and sell 10 thousand dollars to each qualified applicant. He believes that in a situation where the prospects of the country's foreign exchange earnings are uncertain, the supply of these resources should be accompanied by serious considerations about the use and fate of the sold currencies.

Ofeke says about this policy: "This recent policy, that is, the allocation of two billion dollars of currency for the sale of $10,000 to each person, has no economic justification. It is not known how long this restriction will last, and one day these resources may be the source of the country."

He also believes that this action is unlikely to stop the increase in the currency price even in the medium term. According to this economist, in a situation where an important part of the country's foreign exchange resources is limited, the sale of foreign currency to applicants should be evaluated according to its effects on the reserves and future needs of the economy.

Referring to Hemmati's television statements about this policy, Ofeke says that he does not agree with the explanations given about it and believes that the main problem is the lack of currency and how to manage it.

In assessing the possible motivations of this decision, he criticizes sharply and says: "If the goal was that, in my opinion, it is childish and obstinate. It has jeopardized the national interests as a whole."

However, Ofeke believes that one cannot make the same judgment about all the consequences of this policy, regardless of how resources are allocated and consumed. According to him, the sale of this currency may at best cover part of the budget deficit and help reduce liquidity; But the realization of such results depends on who gets the currencies and how they are used after purchase.

He warns that if these resources get into the hands of dealers and traders and get out of the economic cycle through conversion into immovable assets or transfer abroad, the result can be detrimental to Iran's economy.

If the brokers and traders get hold of this currency and take it out of the country in the form of immovable assets, this is a pure loss. We are harming the country with the currency gesture."

In his opinion, if the allocated resources are managed in a way that prevents the outflow of capital or their transformation into speculative demand, it is possible to reduce the negative consequences. Otherwise, the supply of currency in the conditions of limited resources can lead to the loss of part of the financial capacity needed by the country in the future.

The government does not have enough tools to control inflation and recession

In assessing the government's ability to deal with economic problems, Ofeh believes that policymakers are facing limited resources in the current situation and do not have much possibility to implement broader support policies.

Referring to the need to increase support for people in difficult economic conditions, he says that as far as he knows, the necessary resources to expand these supports are not available, and the efforts of policy makers to find more resources have not reached the desired result.

According to this economist, in such a situation, it cannot be expected that challenges such as high inflation and low economic growth will be effectively controlled solely by relying on domestic policies.

In describing the current state of Iran's economy, Ofeke emphasizes that the country's ability to bear more pressures is limited. He believes that the existing oil revenues, if returned to the country's economy, may allow resistance to continue for a while, but this situation cannot be considered as an unlimited support for the future.

He says: "Let's say on the phone that our economy has weakened so much and with the amount of oil we have and if the currency returns, we may survive for a while longer, but today our economy does not have the capacity to survive any longer."

This assessment, in fact, complements the position of Ofge about the two-week collapse prediction: on the one hand, he considers the rapid collapse of the Iranian economy unlikely due to short-term pressures, and on the other hand, he warns against the reduction of the economy's ability to withstand longer pressures.