Despite earlier announcements by government officials that next yearÂ’s budget would be anti-inflationary and that development credit allocations would not go beyond last yearÂ’s figures, in his most recent trip to the Ardebil President Ahmadinejad again repeated the same promise that he had made on his trip to the province of South Khorasan last week. Ahmadinejad promised to double that provinceÂ’s development budget in the upcoming year. He repeated the same promise on his visit to Ardebil.Several government officials, including AhmadinejadÂ’s executive deputy, have blamed the lack of funds for the PresidentÂ’s failure to implement many of the promises that he has made during his provincial visits, a record for any president in IranÂ’s history. It is unclear how the President intends to cut the budget if he intends to double spending in certain provinces and not cut spending in any other.
Last month, Iran’s Central Bank issued several official statements warning about the negative impact of expansionary monetary policies on inflation. In the short period of time since the inauguration of the bank’s new governor, the bank has issued at least four statements warning about inflation and its consequences. According to figures released by the central bank, the amount of money pumped into circulation in the past two years equals the total amount of money in circulation previous to that increase. In other words, more money has been added to the economy in the past two years than all the previous years combined – or, as one economist puts it humorously, since the Achamenian Empire, over 2,000 years ago.
According to prominent economist Saeed Leilaz, under the current circumstances, the government has no option other than to suppress internal dissent and escalate foreign tensions, because, “If everything is calm, then they have to explain to the public why they have failed to raise living conditions after spending all this money, and making all these visits to provinces.”