Economic meltdown pushes Tehran to take risks with pandemic

Government claims toll is decreasing as it ventures into 'jump-starting economy'.
Sunday 12/04/2020
Iranian President Hassan Rohani chairs a cabinet meeting on the latest updates about the spread of the coronavirus (COVID-19). (DPA)
Iranian President Hassan Rohani chairs a cabinet meeting on the latest updates about the spread of the coronavirus (COVID-19). (DPA)

ISTANBUL - Iran’s government has decided that the threat of a possible collapse of the economy is bigger than the danger posed by the coronavirus.

Even though Iran is the hardest-hit country in the Middle East with more than 67,000 infections and over 4,100 deaths caused by COVID-19, the respiratory disease triggered by the virus, President Hassan Rohani is allowing some businesses outside Tehran to re-open on April 11 and has said it is possible that companies in the capital could re-open a week later.

As Rohani’s government pushes to get at least some Iranians back to work, it is trying to sound upbeat about the trajectory of the virus spread, claiming the number of new infections is dropping.

“People’s health is the country’s first priority, but employment, production and businesses in a year that is named ‘Surge in Production’ must be considered as well,” Rohani told a cabinet meeting on April 5, according to the presidency’s website.

“Therefore, all necessary measures must be taken for jump-starting the country’s economy by observing health protocols with people’s health prioritised.”

Even as Rohani’s government acted to get the economy back on track Supreme Leader Ayatollah Ali Khamenei issued a warning to Iranians that the virus remained a lethal danger that would affect the holy month of Ramadan that starts on April 23.

Khamenei appealed for Iranians to pray at home and to avoid mass gatherings and communal prayers during the Muslim fasting month.

“In the absence of public gatherings during Ramadan, such as prayers, speeches… which we are deprived of this year, we should not neglect worship, invocation and humility in our loneliness,” Khamenei said in a televised speech on April 9.

Despite the warning, Rohani’s plan to re-boot the economy is going ahead.

The president unveiled a loan programme of about $17.4 billion for companies and promised support payments of $230 each for 23 million poor households.

In an unprecedented step for the Islamic Republic, Rohani has also requested a loan of $5 billion from the International Monetary Fund (IMF). It is Tehran’s first demand for IMF aid since Iran’s 1979 Islamic Revolution.

“These moves by the Iranian regime demonstrate its intent to move beyond the crisis, but the danger of coronavirus has yet to have passed,” Kaleigh Thomas of the Centre for a New American Security (CNAS), a Washington think-tank, said by e-mail.

Iran’s economy contracted by around 10% last year under the pressure of US sanctions that have crippled the country’s oil sector. Experts say mismanagement and corruption also played a role. The coronavirus pandemic, which has prompted the shutdown of businesses and domestic travel, has worsened the economic situation further.

The economy ministry listed “the escalation of US sanctions and depletion of Iran’s foreign exchange reserves, combined with economic losses resulting from coronavirus outbreak and disruptions caused to businesses that would lead to leaner tax revenues” as the “most biting” challenges facing Iran, according to the Financial Tribune, an Iranian English-language business newspaper.

Rohani gave no details about which businesses would be allowed to re-open on April 11. He said that “high-risk businesses will remain closed until further notice." It remained unclear which companies are considered low-risk.

Iran's Financial Tribune said “swimming pools, sports centres or any place of gathering” would not be allowed to open. A quick return to normal economic activity could trigger a second wave of infections.

Rohani also received permission from Khamenei to take $1.1 billion out of the National Development Fund, the country’s sovereign wealth fund. The money will be used to fight the coronavirus and to help the unemployed.

Farhang Jahanpour, a British academic of Iranian descent and a commentator on Iranian affairs, said by e-mail the decrease in oil revenue due to US sanctions was forcing Rohani’s government to turn to the sovereign wealth fund to confront the challenges posed by an economic crisis in times of a pandemic.

“In view of the negative effect of COVID-19 on society and economy, it would be quite logical for the government to dip into [the] National Development Fund in order to support the economy and help the most vulnerable members of the society.”

Rohani’s government feels encouraged in its effort to revive the economy by what it claims is a gradual decline in coronavirus cases. It says social distancing measures are showing an effect.

The number of 117 deaths in the 24 hours to April 9 reported by Tehran was the lowest daily death toll in more than three weeks, according to the Turkish news agency Anadolu. Figures compiled by the Johns Hopkins University in the US showed that Iran’s number of new infections per day has fallen since March 30, when it stood at 3,200. The figure given by Iran’s health ministry for April 9 was 1,634.

But there has been speculation inside and outside of Iran that the real number of deaths and infections in the country could be much higher than officially announced. Iran initially downplayed the outbreak in February amid the 41st anniversary of its 1979 Islamic Revolution and a crucial parliamentary vote.

About eight in ten COVID-19 cases in the Middle East are said to have originated in Iran.