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Ahmadinejad's legacy: NIGC goes bankrupt

19 November 2013 [11:01] - TODAY.AZ
In his last days in office, Iran's former president, Mahmoud Ahmadinejad released a 140-item report on the country's development during his 8-year presidency. The 137th item says : "The country's investments in industrial projects during his two terms in office were 6.8 times more than his preceding administration ".

Ahmadinejad had once said that the country's economic growth during his presidency has been way more than all the previous administrations after the 1979 revolution put together.

President Rouhani's government, however, has repeatedly rejected the these items and statistics one-by-one.

For example, the former president claimed that the average economic growth during his 8-year period equaled to his preceding administration's average figure (5.7 percent), but the Statistical Center of Iran recently reported that the figure is below 3.5 percent, while last year's growth alone stood at negative 5.4 percent, and this year's figure is predicted to be around negative 1.6 percent.

According to Iran's Majlis Research Center, Ahmadinejad's administration spent 23 billion dollars for each one percent of economic growth, which is 5 times more than the amount used by its preceding administration for the same achievement.

Ahmadinejad was the mayor of the capital, Tehran before being elected president. Surely, he achieved some progress during his two terms in office, but the outcome suggests that he forgot a simple management trick from history: Spending all the budget for building "a bridge much broader than the flood" isn't wise, but is merely "much ado about nothing".

Ahmadinejad had focused mainly on popular projects with poor efficiency, not fundamental ones.

In the oil and gas sector, Ahmadinejad boasts about spending 46 billion dollars on the development project of Iran's biggest gas field, South Pars, just in his second term. But again the statistics show that no new phase has been inaugurated in the four-year period, and will not come on stream even by the end of the next Iranian calendar year (March 20, 2015).

In line with the other gloomy aspects of Iran's economy, (the national currency dropped by 3.5 times in value during Ahmadinejad's era), the Managing Director of National Iranian Gas Company (NIGC), Hamidreza Araqi, announced on November 16 that the NIGC has gone bankrupt.

NIGC bankruptcy

Of course, the NIGC's bankruptcy, which was announced by Araqi, is not directly related to the Western sanctions. It is the consequence of the decision made by the administration of Ahmadinejad to continue the implementation of the subsidy reform plan at any expense.

According to the subsidy reform plan, which was started on December 19, 2010, 45,500 rials (about $18.2 based on the U.S. official exchange rate of 24,900 rials) is paid to each Iranian against freeing up prices of fuel and specific goods. The sum, which is paid in cash to families, is estimated to be around 50 per cent of the money which is earned after freeing up the prices.

Although 20 percent of the revenues had been planned to be allocated to the industry sector, but it was not allocated. Moreover, the share of the industry sector was paid in cash to people. The administration borrowed tens of billions of rials from the Central Bank as well as the major portion of revenues the cash subsidies from water, waste water, and gas companies to compensate deficit in cash subsidy payments.

Mehr news agency quoted Araqi as saying that "evidence" show the NIGC has "some 100 trillion rials in debt".

Iran produces 153 billion cubic meters of natural gas annually, and supplies the same amount to household and industrial units.

On October 27, Iranian oil minister Bijan Namdar Zanganeh announced that according to the current year's budget law, 270 trillion rials (about $10.8 billion) should have been drawn out of the Oil Ministry's financial resources to allocate to cash subsidy payments, but the financial resources were limited, so that the issue led to the bankruptcy of the NIGC and the National Iranian Oil Products Distribution Company.

In September 2011, the head of the Supreme Audit Court of Iran said that the [former] administration used 148 trillion rials (about $5.9 billion in) since the start of the subsidy reform plan by August 2011 from the Central Bank's account, oil incomes, and the general budget to pay cash subsidies. Mr. Zanganeh has said that the Oil Ministry revenues will be used this year to compensate for the shortage of budget to pay the subsidies.

The administration pays 35 trillion rials (about $1.4 billion) each month as a cash subsidy. The upshots of the detrimental economic measures of Mr. Ahmadinejad's administration, which gained some $600 billion equals to the half of the country's total oil incomes during the past 104 years, are not confined to his 8-year incumbency.

President Hassan Rouhani's first deputy, Es'haq Jahangiri and his deputy for strategic affairs Mohammad-Baqer Nobakht have said that the administration suffers from over 700 trillion rials (about $28.1 billion) budget deficit. The country's total gross domestic product "at current prices" stands at $500 billion.

Dalga Khatinoglu is Iran News Service head of Trend Agency

* Refers to " What need the bridge much broader than the flood? The fairest grant is the necessity" in "Much Ado About Nothing" written by William Shakespeare.

Dalga Khatinoglu  /Trend/


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