Hidden rent | The government should leave the current model to eliminate the 4200 Toman currency / Launching a national digital currency to organize monetary policy

According to the economic correspondent of Fars News Agency, one of the policies that has been implemented in the country’s economy since 1997 has been the issue of allocating 4200 Tomans to some basic goods. With the escalation of sanctions, the Twelfth Government decided to prevent the increase of commodity prices and basic necessities of the people with this policy, but this policy, by creating a kind of rent for certain people, not only failed to prevent the increase of commodity prices, but also created a wide network. Brokers also lost a significant portion of the country’s currency.

Khalili, an Iranian economics researcher and economist on the need to eliminate the preferred currency or the so-called $ 4,200, believes: The consequences of such a policy have been said many times and we all know the consequences of corruption. The point is, we have to delete or keep it now. If we want to eliminate this now or not, it depends on the result of the interaction of the three Ministries of Silence, Agriculture and Social Security.

We have to see what is the cost of benefiting from the improvement of this supply chain system of these goods compared to the fact that we come to pay 4200 Tomans in foreign currency? Should we eliminate this and pay subsidies to the people or should it remain the same? The cost of its benefits in these ministries should be weighed and then we should see what we should do. The problem is that this subsidy does not hit the target, and on the other hand, if we remove it and compensate the people with the subsidy in some way, we do not know whether it will hit the target or not. Its inflationary effects are also in question. Following Fars’ conversation with Hamed Khalili Read:

Fars: As the first question, what are the consequences of the government’s payment of 4,200 Tomans for the import of basic goods in recent years on the Iranian economy?

Khalili: The Germans have a saying that wherever the pain and illness increases, so does the doctor. This issue has been addressed from various aspects and its unfortunate consequences for the country’s economy have also been mentioned. But the issues raised are generally negative. What should be done is not very agreed, and the problem of removing the 4,200 Toman currency does not just go back to the government, which does not know what to do. It even goes back to the synergistic product of the collective thinking of our economists, who do not know what their demand should be to explicitly state and lead the government in this direction. Because there is no consensus, then there is a problem. In answer to the question of what these problems are, it must be said that any pricing system in which there is a rent, major problems arise. Unfortunately, our country has become a laboratory for all kinds of currency and price systems, and in the past decades, it has had all kinds of multi-rate systems in the country. This also causes some people, due to their human nature, which is generally greed, to start engaging and greedy middleman activities. There are many examples in this regard. I do not need to give you an example.

* The problem of paying 4200 Tomans is not reaching the target community

Fars: You say that because the consequences have been stated and everyone knows that such a policy has not given the right answer, it should be eliminated? But is this policy right now?

Khalili: It is said that someone who had lost his key was looking for him in the dark and under a lamp. They said why don’t you look around, he said, I only see here. One question now is whether or not it should be removed. The consequences of such a policy have been said many times and we all know the consequences of corruption. The point is, we have to delete or keep it now. If we want to eliminate this now or not, it depends on the result of the interaction of the three Ministries of Silence, Agriculture and Social Security. We have to see what is the cost of benefiting from the improvement of this supply chain system of these goods compared to the fact that we come to pay 4200 Tomans in foreign currency? Should we eliminate this and pay subsidies to the people or should it remain the same? The cost of its benefits in these ministries should be weighed and then we should see what we should do. The problem is that this subsidy does not hit the target, and on the other hand, if we remove it and compensate the people with the subsidy in some way, we do not know whether it will hit the target or not. Its inflationary effects are also in question.

* The government is unable to pay the new subsidy

Fars: Because there is no accurate information about the deciles, should we continue in the same way or is there an intermediate solution in this field?

Khalili: See, considering that we do not know whether it hits the target or not, so it is not clear that now is the right time to remove the 4200 Toman currency or not? I think logically our current policy should be intermediate. At the same time, I have already stated that this paradigm (the dominant model) in which our economy is, somehow needs to get out of it. I connect this to the second point that in this paradigm we are in, we are constantly reproducing a series of irrelevant and immature answers. That is, now a prevailing theory that has formed in part of our policy-making body is to eliminate this preferred currency and then subsidize the people. Although I have said that I have no opinion for or against your question here, I leave it to the specialized discussions that exist in the expert body of the government; My opinion is that these solutions are wrong.

As we experienced in the matter of energy. We created a price increase and then, with some kind of cash payment to the people, we ended this case and saw that it was unsuccessful; It will be the same here. In 1999, according to statistics provided by the budget program organization, the government paid 100,000 billion tomans in cash subsidies. The total development budget of the country in the same year was about 65 thousand billion Tomans. Putting the construction budget on a scale and putting the cash subsidy paid to the people in the same range can itself be informative for us. In the year 1400, we have increased this development budget to nearly 100,000 billion. We have nominally added more. It should be noted that this 100 thousand billion tomans is almost one tenth of the general budget of the whole government. The rest is other expenses that do not have many direct benefits for the country. Now, if we look at the preferred currency statistics, again in 1999, the average monthly number was high. In the whole year, we have allocated 4,200 dollars in 4,200 dollars. If we consider this, as a basis and to pay cash subsidies, we want to pay the difference between the exchange rate of half and $ 4,200 to the people, multiply by ten billion dollars, it becomes approximately 200,000 billion tomans. You prefer the half exchange rate of 25,000 Tomans to minus 4,200 Tomans, the difference is almost 20,000 Tomans, which if multiplied by ten billion, the result will reach 200,000 billion Tomans. In other words, in addition to 100,000 billion tomans, which is the burden of subsidies on the government, we should add another 200,000 billion tomans to cash subsidies.

* The purchasing power of subsidies will be very low in the future

Fars: With this account and the book that you made, the government must either pay all its budgets or pay subsidies. Is there such a possibility for the country?

Khalili: What seems to be happening is that our social security system is devouring our production system like a giant whale. I’m not saying what to do. I am not saying that it should definitely be done or not, but I am saying that you should look at the cost of paying this subsidy of 200,000 billion Tomans? I ask policymakers to think about the fact that it has such a cost and will not return. We can not recoup these costs from the people. At the same time, we have to think that in any case, these subsidies will definitely have the effect of inflation in such a way that in the next one or two years, its purchasing power will be drastically reduced. We get to the point where the money we give to people becomes worthless. I draw the attention of politicians to this issue. I have these two critical points.

* The government should not think about implementing the easiest policy

Fars: The figures for this subsidy can cause problems for the country’s economy, what can be done with this situation of government budget deficit? Meanwhile, if this subsidy is given to production, can we hope that some of the problems will be reduced?

Khalili: bThere is this concern. Given the budget deficit that we have, it is very likely that the country will face a serious problem in providing these figures. Naturally, this would not have been a concern if we had strengthened the supply side. The problem is that a number of issues have been overlooked by our policymakers. We have not considered anything called the speed of money circulation. It is true that the government says that no money has been created and we take this money and distribute it among the people, but you increase the speed of money circulation and you give hot money to the people. Because the supply side has not increased, the person sitting in his shop selling the goods sees that the demand has increased or he has to supply more goods, or raise the price. It’s very simple. Most prefer to raise prices due to problems in the supply and production chain and supply side. They have an excuse and it is provided. That is to say, such a paradigm produces immature solutions and is constantly reproducing these simple solutions, in a way. The first thing that comes to the mind of an economist is that it is better for us to add, divide and distribute this figure among the people, thus compensating for the decrease in purchasing power. These are short-sighted solutions, and I think in this paradigm that we are still in, and the new government has not done anything yet, so we, as those who have studied economics, should think that policymakers are the least they can do. So we have to make sure that the government avoids going the wrong way in this regard.

* The government should lay rails to remove the 4200 Toman currency

Fars: So far, everything that has been said has been negative. What program should be presented to the government in order to provide a solution to the government in this regard?

Khalili: What we should do positively, we should also give the government a solution. I have always tried not to be just a critic and offer a solution. In this case, the answer is no or no. We need to lay the rails. In my opinion, one of the most effective rails that our government can do, and it depends on how it shapes this issue, is the launch of the national digital currency. It’s so important. If we can properly create the issue that has been raised now, which has a detailed discussion and has its own terms and conditions, we can use the context of this capacity, and this is one of the ways in which subsidies and the issue of 4200 currency can be addressed. Help us well. This is one of the rails that can be done. Other railings need to be addressed. This is what comes to my mind. We are in a phase where our politicians must be able to make the right decisions so that there is no new problem for the country’s economy. In the discussion of eliminating the currency of 4200 Tomans, it is very necessary for things to proceed correctly, deliberately and rationally. I hope that whatever they do, they will avoid the wrong solutions.

End of message / b

You can edit this post