Ahmadinejad’s Economic Savvy

September 1, 2011 by · Leave a Comment 

‘He’s giving back half of the 60 billion dollars in savings directly to the people in monthly deposits. So every Iranian, man woman and child, is eligible to receive the equivalent of 40 dollars a month.’

By Fareed Zakaria, CNN

2011-08-26T105634Z_682489454_GM1E78Q1GTX01_RTRMADP_3_IRAN-PALESTINIANS-AHMADINEJAD

Iranian President Mahmoud Ahmadinejad waves to worshippers before speaking at Friday prayers on Jerusalem Day in Tehran August 26, 2011.

REUTERS/Morteza Nikoubazl

From the White House to London’s House of Commons and beyond…few Westerners have anything nice to say about Mahmoud Ahmadinejad.

But there’s one group that has glowing words of praise for Iran’s President – and it’s based not in Tehran, but in Washington.

The International Monetary Fund’s latest report paints a pretty picture of Iran’s economy.

It says growth has hit 3.2%, and will accelerate still further.

Inflation has dropped from 25% to 12% in just two years.

And Tehran has managed to do what every major oil exporter can only dream of accomplishing: It’s slashed subsidies on gas to recoup 60 billion dollars in annual revenue. That one-sixth of Iran’s entire GDP.

Why is this happening? And how can it be despite years of economic sanctions?

What in the world is going on?

Some say the IMF’s numbers can’t be right.

But we have no reason to doubt their work. The fund reasserted this week that its projections were independent of the government.

The real story here is that Iran has actually begun implementing some economic reforms. For decades now, Iranian leaders have tried to wean its people off cheap oil – oil that is subsidized by the government.

Cheap oil that has no connection to real market prices is not sustainable. Iran knows it, and so does every country from Saudi Arabia to Venezuela. But in the same way that any talk of tax increases here in America is considered heresy, people in oil-rich countries believe as an article of faith that they deserve cheap oil.

So how did Iran finally cut out the freebies?

The backstory is a complex game of chess between Ahmadinejad and someone much more powerful – the Supreme Leader Ayatollah Khamenei.

One theory goes like this: The Ayatollah thought cutting subsidies would make Ahmadinejad deeply unpopular. An ensuing revolt would then remove the one man who’s come to challenge the Supreme Leader’s power.

Another theory is that Ahmadinejad felt confident enough to go ahead with the reforms because he’s crushed the opposition Green Movement.

Either way, he’s played a smart hand. He’s giving back half of the 60 billion dollars in savings directly to the people in monthly deposits.

So every Iranian, man woman and child, is eligible to receive the equivalent of 40 dollars a month.

That kind of money won’t make any difference to Tehran’s upper classes.

But that’s not Ahmadinejad’s constituency.

On the other hand if you’re poor, if you have many children, and if you make sure the whole family signs up for the deposits, you’ll probably be saying “Thanks, Mr. President”.

The key thing to note here is that President Ahmadinejad had no choice, and neither did the Ayatollah.

Iran could not afford the subsidies anymore. Its economy is highly dysfunctional with many massive distortions and subsidies. And Washington’s recent targeted sanctions are beginning to bite.

It is now harder than ever before for Iran to do business with the world. Most of the major international traders of refined petroleum have stopped dealing with Iran. Tehran now has to rely on much costlier overland shipments for its exports.

And it is now almost impossible to conduct dollar-denominated transactions with Iran. So we were left with the bizarre case last month of China resorting to the barter system to pay Iran for 20 billion dollars worth of oil.

The IMF has a point. Iran is implementing some needed reforms and as a result its economy is doing better. The irony is that it’s happening – in some part – because of our sanctions. Talk about unintended consequences.

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Muhammad Yunus

July 21, 2011 by · Leave a Comment 

By Syed Aslam

imgresMuhammad Yunus was born in 28 June of 1940 in the village of Bathua, near Chittagong,  what was then Eastern Bengal.  He studied at Dhaka University, East Pakistan now Bangladesh, and graduated with MA degree in economics.  He qualified for  Fulbright scholarship to study economics at Vanderbilt University and received his Ph.D. in economics  in 1969. The following year he became an assistant professor of economics at Middle Tennessee State University. Returning to Bangladesh in 1972 Dr.Yunus headed the economics department at Chittagong University.

His father was a successful goldsmith who always encouraged his sons to seek higher education. But his biggest influence was his mother,  who always helped any poor that knocked on their door. This inspired him to commit himself to eradication of poverty. In 1974, Professor Muhammad Yunus,  led his students on a field trip to a poor village. They interviewed a woman who made bamboo basket, and found out that she had to borrow the equivalent of 10 cent to buy raw bamboo for each basket made. After repaying the middleman, sometimes at rates as high as 10% a week, she was left with a few cent in profit. Had she been able to borrow at lower rates, she would have been able to make some money and raise herself above subsistence level.

Dr.Yunus took matters into his own hands, and from his own pocket lent  money equivalent $27 to  basket-weavers. He found that it was possible with this tiny amount not only to help them survive, but also to create the spark of personal initiative and enterprise necessary to pull themselves out of poverty.

Against the advice of banks and government, Yunus carried on giving out micro-loans, and in 1983 formed the Grameen Bank, meaning village bank founded on principles of trust and solidarity. In Bangladesh today, Grameen Bank has 2,564 branches, with 19,800 staff serving 8.29 million borrowers in 81,367 villages. On any working day Grameen Bank collects an average of $1.5 million in weekly installments. Of the borrowers, 97% are women and over 97% of the loans are paid back, a recovery rate higher than any other banking system. Grameen methods are applied in projects in 58 countries, including the US, Canada and France.

Muhammad Yunus has shown himself to be a leader who has managed to translate visions into practical action for the benefit of millions of people, not only in Bangladesh, but also in many other countries. Loans to poor people without any financial security was an impossible idea. From modest beginnings three decades ago, Yunus has, first and foremost through Grameen Bank, developed micro-credit into an ever more important instrument in the struggle against poverty.

Dr. Muhammad Yunus was the first Bangladeshi to  get a Nobel Prize in 2006. After receiving the news of the award, Yunus announced that he would use part of his share of the $1.4 million award money to create a company to make low-cost, high-nutrition food for the poor; while the rest would go toward setting up an eye hospital for the poor in Bangladesh. He has earned many prestigious awards.

Aslamsyed1@yahoo.com

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