Many countries are suffering a sharp deterioration in the value of their national currencies, which has affected living standards due to higher prices and lower purchasing power.
The way to tackle this has varied from one country to another, whereby those with civilian regimes have been addressing the crisis completely different from totalitarian and ideologised ones.
Currently, there are two examples of regimes suffering from a currency collapse, Iran and Argentina. The latter’s currency has fallen by about 50 per cent since the beginning of the year, but the ways to deal with it have been widely different.
In Argentina, which enjoys an elected regime, many factors contributed to the corrosion of its national currency, particularly economic mismanagement, growing public debt and deficits, as well as the resultant impact on sectors such as agriculture.
In Iran, with its totalitarian dictatorship, elections are a mere eyewash and the constitution gives the appointed supreme leader absolute powers to run the government for life without accountability or control from any side. Thus, the devaluation reasons include corruption and mismanagement by the supreme leader and the Revolutionary Guard.
Reasons also include the destruction of water resources and the financing of costly foreign wars, through the support of terrorist organisations like Hezbollah and Al Houthis in Yemen, which have led to wasting the country’s vast wealth and its seizure by influential groups. In addition, the economic boycott has deprived Iran’s local economy of the basic elements for growth and prosperity.
The question here is how each country dealt with economic deterioration and the currency collapse. It reflects the true nature of each regime and the prospect of solving the crisis, especially the currency collapse.
In Argentina, the country came up with factual reasons for the successive devaluation of the peso, including the recession, which contributed to a huge deficit as well as mounting public debt. Immediate actions were taken to tackle the reasons and not engage in blaming foreign parties who have nothing to do with the internal mismanagement.
In Iran, it occurred the other way. The supreme leader and the Revolutionary Guard have not had the courage to bear the consequences of economic mismanagement. They attributed the crisis to a foreign conspiracy, while forgetting other technical reasons and the endemic corruption, as well as wasting its wealth on foreign conflicts that had nothing to do with national security.
This has led to a further deterioration in the currency, due to a wilful ignoring of the root causes that is well known to the Iranian people and even to top officials of the regime. This was made clear by the powerless President Rouhani, as well as former president Mahmoud Ahmadinejad, who accused the Revolutionary Guard and the supreme leader of corruption and controlling the economic life.
The professional way to address such crisis, as is the case in Argentina, will ultimately lead to a recovery in the value of peso, particularly after agreeing to a rescheduling of debts with the International Monetary Fund, which offered Argentina $50 billion (Dh184 billion) to reduce the deficit.
Meanwhile, in Iran — which disregarded the root cause of the crisis and attributed it to a “conspiracy theory” — economic conditions will continue to deteriorate. Its rial, along with the regime itself, will definitely collapse due to a failure in addressing the crisis. This means the situation will last and be made even worse by the supreme leader and his entourage, including the Revolutionary Guard and other opportunistic forces, who have smuggled Iran’s wealth abroad and left the Iranian people in the lurch.
Dr Mohammad Al Asoomi is a UAE economic expert and specialist in economic and social development in the UAE and the GCC countries.