Continued Decline of Indices in Tehran Stock Exchange; Government Faces Serious Budget Constraints

The Tehran Stock Exchange index, which had calmed down after a heavy two-day drop, fell again on Wednesday. In this regard, a knowledgeable source told Voice of America that the Islamic Republic government is facing a "serious constraint" in securing its budget. The debate over reforming or shutting down the stock market remains heated and has reached the official news agencies of the Islamic Republic. According to reports from news agencies in Iran, the total stock index on Wednesday, 20 Ordibehesht, "decreased by 28,092 units to 2,277,000 units," with "85%" of symbols in the stock market being "negative." Investments by the Social Security Organization, the Mapna Industrial Group, and Iran Khodro had the most negative impact on the stock market on Wednesday. The International Monetary Fund, in its latest report, predicted an inflation rate of 42.5% for Iran's economy this year, stating that the Islamic Republic needs to sell oil at a price above $350 to balance its government budget. A knowledgeable source in Iran regarding the stock market told the Persian section of Voice of America that "the government is in a serious budget constraint" and added, referring to the IMF report, that "the OPEC oil price is currently around $70," meaning that "the budget deficit in Iran is so severe that the Islamic Republic must sell oil at more than five times the current price to escape the budget crisis." This economic observer, who requested anonymity due to security considerations, noted that the Islamic Republic is forced to sell oil at a discount due to sanctions and pointed to a significant increase in taxes, adding: "Collecting more taxes from a market that is suffering from severe recession means the destruction of many businesses, deepening the recession, and even social unrest." According to this journalist and economic analyst, "the government, knowing these facts, has tried to gather liquidity and direct it to the stock market" while also imposing restrictions on the purchase of assets like dollars and cars and proposing a heavy 60% tax on the profits from intermediary housing sales. Some stock market experts say that the capital market in Iran has been "manipulated." This informed source told Voice of America: "After the stock market's renewed growth and breaking the record of 99, meaning the total index surpassing 2,100,000 units, the stock market did not correct as analysts expected, and it was clear that the market was being manipulated to possibly redirect the public's idle liquidity from gold, currency, and cars to the capital market." This knowledgeable source emphasized the government's concern about "repeating the events of 99 for the capital market," adding that the government "knows that the continuation of the market's rise is not possible with further manipulation" and that "shareholders should approach this market cautiously and, if they lack sufficient knowledge in this area, should not invest their capital directly in the stock market and should seek the help of portfolio managers." According to some stock market analysts, "information rent" of legal entities in the stock market, news related to the "trigger mechanism" against the Islamic Republic by Israel, the potential terrorist designation of the Revolutionary Guards, and the status of pension funds are other factors that have caused a severe drop in the stock market. Additionally, Siamak Khosravi-Pour, another economic journalist, has described the drop in Iran's stock indices to Voice of America as "planned."