Street protests have recently been taking place across Iran and commentators have put forward various theories why. These range from economic grievances to internal disputes and external meddling. Though there’s no clear consensus on what drove the protestors to the streets, earlier in December, Iran’s President released a 2018/19 budget proposal with details that were previously kept secret. These spread rapidly across the country via social media. Suddenly Iranians were more intimately aware of the rising cost of military and religious institutions, and cuts to popular social programs. Some reporters argue that the release of these budget details added to the already growing discontent that spilled onto the streets a few weeks later. With some of the protestors calling for Rouhani’s removal, his decision to provide more transparency to his citizens appeared to have backfired, with some scratching their heads as to why he did it. The President’s principal-agent problemSome context framed by principal-agent theory can help explain why. President Rouhani leads the reformist wing of Iranian politics. Having negotiated Iran’s nuclear deal, he won a resounding re-election victory in May 2017, promising to reinvigorate a stagnant economy. This requires broad based reforms, including budgetary reforms. Rouhani has been operating a conservative fiscal policy since taking office in 2013, although notionally balanced budgets have missed the target in recent years leading to a widening fiscal deficit. The recapitalization of Iran’s troubled financial sector will create new fiscal pressures, necessitating further fiscal reforms. |
