Title: Economic Stability Hinges on Fiscal Discipline and Monetary Reform, Says Parliament Official
A Call for Fiscal Restructuring
The key to stabilizing the national currency and controlling inflation lies in the government’s commitment to financial discipline and sustainable revenue generation, according to recent analyses. Experts emphasize that as long as the state budget deficit is financed through the Central Bank, pressure on the monetary base and the subsequent weakening of the Rial are inevitable. The recommended path forward involves eliminating non-essential expenditures and replacing unstable income sources with sustainable ones, particularly through comprehensive tax system reforms and combating tax evasion.
Parliamentary Perspective on Core Solutions
Seyed Farid Mousavi, a member of the Parliament’s Economic Commission, outlined three primary steps to curb inflation and stabilize the Rial: utilizing the debt market, restructuring existing debts, and avoiding direct borrowing from the Central Bank. He stressed that without these fundamental corrections, any foreign exchange or monetary policy would only serve as a temporary relief measure.
Addressing the Repatriation of Export Revenues
Responding to questions about unreturned export currency revenues and ineffective monitoring of currency and goods smuggling, Mousvi identified this as a key factor in the current economic challenges. “When currency from exports does not return, the country’s foreign exchange resources effectively become limited, increasing pressure on the exchange rate,” he stated. He advocated for creating a simplified, transparent, and incentive-driven mechanism to encourage exporters to repatriate their earnings, alongside firm action against those who fail to meet their currency obligations. He concluded that without transparency in the country’s currency flow, neither the foreign exchange market will stabilize nor will monetary policies achieve the necessary efficiency.
Inflation and Exchange Rate Forecasts
Commenting on official inflation forecasts and expert predictions for the exchange rate, Mousvi clarified that achieving a lower inflation rate is contingent upon the government halting monetary borrowing and continuing a contractionary monetary policy. He noted that predictions of a higher exchange rate are based on the reality of high domestic inflation relative to low global inflation. While managing the budget deficit and the currency market with real resources could prevent a further surge, he affirmed that without fundamental financial reforms, such price levels are a realistic expectation, underscoring the critical need for systemic adjustments.