Mahmoud Ahmadinejad’s biggest domestic challenge is Iran’s moribund economy.
As he was sworn in the new president pledged to move the economy forward, saying he believes he can “solve the problem of unemployment.” But under his rule the number of people out of work has risen. Reliable figures are difficult to get, but one former minister said the jobless rate is up from 10.5 percent of the working population when Ahmadinejad first took power to 17 percent now. The rate is much higher for young people who make up two thirds of the population of 71 million. Despite Iran’s oil wealth 20 percent of its people live in poverty. And oil is a double edged sword, it accounts for 60 percent of Iran’s tax revenues but when prices fall the economy suffers. In the last year prices have fluctuated wildly with US light crude close to 150 dollars a barrel last summer and falling to near 32 dollars in December. Critics argue that much of the money from sales of crude has been wasted through public spending targeted at supporters of Ahmadinejad as well as inefficiency and corruption. Inflation is also a problem. It is now believed to be over 25 percent, up from 11 percent four years ago. To keep the oil money flowing Iran needs to replace aging on infrastructure but Ahmadinejad’s anti western rhetoric and nuclear programme make that difficult. International sanctions and pressure from the west are keeping banks from lending and companies from investing. Against that background the International Monetary Fund forecasts Iran’s economic growth will be just 3.2 percent this year. That would be down from 4.5 percent last year and almost eight percent in 2007.