Pr.Kamran Dadkhah’s exclu­sive article for Trend. Iranian origin econ­o­mist Dad­khah is asso­ciate pro­fessor in the depart­ment of eco­nomics at North­eastern Uni­ver­sity, Boston.

Finding reli­able data on the Iranian economy has become increas­ingly more dif­fi­cult. The data on gov­ern­ment debt to Bank Markazi (the cen­tral bank) is reported in the annual bal­ance sheet and eco­nomic report of the bank. For the past three years the bank hasn’t pub­lished its bal­ance sheet; the last issue pub­lished was for the year 2009. Based on other reports of the bank we know that by the end of 2010, the gov­ern­ment (including com­pa­nies and orga­ni­za­tions owned by the gov­ern­ment) debt to the cen­tral bank was 219 tril­lion rials or at the offi­cial exchange rate of the time, $17.9 billion.

On June 9 of this year Mr. Shamseddin Hos­seini, Iran’s finance min­ister, declared that the gov­ern­ment and gov­ern­ment com­pa­nies and orga­ni­za­tions owed the cen­tral bank the equiv­a­lent of 350 tril­lion rials. Then Mr. Ahmad Tavakoly, a member of the Iranian Majlis (par­lia­ment) declared that the gov­ern­ment has reeval­u­ated its dollar deposits in the cen­tral bank using the new offi­cial exchange rate. Since the dif­fer­ence between the new rate and old rate is 12740 rials and since the gov­ern­ment had deposited $58 bil­lion, this would add 740 tril­lion rials to the gov­ern­ment deposits in the bank. If we believe the num­bers of the finance min­ister and Mr. Tavakoly, then the gov­ern­ment has wiped out its debt to the cen­tral bank and has even 390 tril­lion rials extra to bequeath to the next government.

But this is no more than leg­erde­main (an accounting trick). The gov­ern­ment could have set the offi­cial rate at 30,000 rials per dollar and in that case the dif­fer­ence would have been 1029 tril­lion rials. But an economy cannot be man­aged with accounting tricks.

Read the article at Trend →