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Wednesday, December 22, 2010

Iran faces economic crisis

Al Arabiya (Arabic only) has an article detailing the economic woes that Iran faces.
With the worsening budget deficit, soaring fuel consumption and its simultaneous problems in production, Iran's options are extremely limited.

The country has only two choices: either the devaluation of local currency and a willingness to face the negative economic consequences, or removal of subsidies on the staples and facing the wrath of the street.

[Analysts believe that] low-income people will be most affected by the decision to lift subsidies on basic food commodities that will be channeled for the benefit of employers, which may lead to unrest in the short term.

...Many fear that the elimination of subsidies will cause a higher inflation rate than the 10% inflation Iran has currently, which can increase the discontent towards the government.
I have doubts about the chances of sanctions working at this late stage, but this is the time to tighten them further.