Persian Empire 1845

Chapter 588 Worried
The economic crisis inevitably affected Iran, causing the Tehran Stock Exchange to go into a frenzy, with stock market value falling by 39%, and long queues of people waiting to withdraw their deposits from banks.

Luxury goods consumption by European nobility and wealthy merchants was hit hardest. Large-scale cancellations of carpet orders for Iran led to mountains of unsold inventory. Textile mill operating rates plummeted by 43%. Prices of exported goods such as cotton, wool, and dried fruit were halved, while grain prices rose by 14%, tobacco by 23%, and sugar and other products also saw significant increases. Iran's booming economic development was abruptly brought to a halt.

The Musharraf government, which should have been making great strides, is in crisis, with members of the Liberal Party and the Whig Party launching fierce attacks on the government in parliament. They accuse it of blindly investing and neglecting people's livelihoods.

"Minister of Finance, our economy is currently in crisis. What should the government do now?"

Liberal Party MP Mousavi questioned Shahriari in parliament, leaving the finance minister speechless for the first time. He could only say that the Ministry of Finance currently intends to cut unnecessary spending and inject 2000 million riyals into the banking system.

This clearly did not quell the anger of the members of parliament; Whig party members even rushed onto the podium to attack him, but were stopped by guards. Shahriari had never felt so frustrated.

Musharraf, as prime minister, was under even greater pressure. Rabbani reported to the Shah on the country's economic situation, and the past prosperity seemed like a mirage in the face of the economic crisis.

"my country's exports of kerosene, dried fruit, and grape juice fell by 18%, 35%, and 52% respectively, and the prices of textiles such as carpets also dropped by nearly half."

Many cash crop growers have gone bankrupt, and switching to grain farming will take time. A severe food shortage seems unavoidable.

"okay."

This is the biggest test Nasser al-Din has ever faced. The economic crisis has led to a contraction in global oil transportation and production, causing oil prices to plummet. The sharp decline in export revenue, on which the government relies, has exacerbated its already strained finances. Large-scale infrastructure projects in Iran, such as railways and ports, may become unfinished projects due to insufficient funding.

How are things at the banks?

"According to reports from various regions, banks are experiencing varying degrees of bank runs. If confidence cannot be restored quickly, some banks may go bankrupt."

Naser al-Din Shah abruptly stood up, his ruby ​​belt clinking against the hilt of his sword: "In that case, close the Tehran Stock Exchange for ten days and ban the trading of government bonds! Also, have the customs raise the export tax on cotton and dried fruit from 15% to 30%, even if they rot at the docks, they can't be sold cheaply to Europeans!"

"In addition, if the bank run continues, then let the banks print more banknotes."

"Shah, you can't do this!"

Shahriari, who had just returned from parliament, nearly jumped out of his skin when he heard the news.

“Shah, printing more money will accelerate inflation. The prices of food and daily necessities have already risen to a point where the people can no longer afford them. If this continues, they will probably protest.”

"But what can we do? We can't just watch the banks go bankrupt. You know what the consequences will be."

Fortunately, the entire bank's total deposits amount to only 11 billion, so they can grit their teeth and get through this. However, the government is about to experience a period of fiscal tightening, and they're going to have to endure some tough times.

Shahriyari could only acquiesce to the Shah's suggestion; printing more money and causing inflation was better than bank failures.

"By the way, with trade currently sluggish, fiscal revenue is expected to decline as well. Your fiscal plan will need to be revised." "I have already prepared it; please review it, Shah..."

Shahriyari wanted Nasser al-Din to see it, but the Shah directly told him to speak. The royal family could reduce palace spending by 25%, and anyone wanting to oppose the government should approach him directly.

"Currently, the government also needs to suspend the construction of all new large-scale weapons and equipment, suspend all non-essential construction projects in various regions, cut all government department spending by 15%, and freeze civil servant recruitment."

At the same time, a luxury tax will be levied on imported luxury goods, and consumption taxes will be increased on coffee and silk. This will also generate additional revenue.

Calculations suggest that if implemented, this could save 3700 million in expenditures and increase revenue by 2000 million, significantly alleviating the financial strain.

The government is obsessed with large-scale infrastructure investment, but fiscal revenue cannot cover it, so it can only rely on issuing national debt to maintain operations. This needs to be significantly reduced.

"In addition, there are some government-controlled factories that need to be sold as soon as possible, and their losses are also an important factor in the fiscal deficit."

Although the government has only established more than 400 factories so far, these factories often employ more than a thousand people.

Because these companies don't prioritize profit in their business philosophy, they often blindly start production regardless of costs or sales channels. This isn't a problem when the economy is good, but now many factories are suffering losses, with unsold inventory and unrecoverable capital.

Those businesses, lacking cash income, often struggled to pay wages and purchase materials, so they applied to the Ministry of Finance for operating subsidies. However, the government's attitude was: "Since this is done to encourage industry, there's nothing we can do about some losses."

This all-encompassing approach, in turn, fosters a dependency mentality among enterprises, leaving them without internal motivation or external pressure for development. Instead of seeking survival and development through their own economic activities, they rely on government subsidies year after year.

Secondly, the low quality of enterprise managers and workers is also a significant factor affecting economic efficiency. As for the products, not only are the costs high, but the quality is also poor and the quantity is small. Furthermore, improper factory location, various accidents, and worker slowdowns and riots also have a certain impact on the company's operating efficiency.

“28 factories are in serious financial distress, 52 are operating at a loss, and 39 are barely making a profit. These factories employ more than 100,000 people and need to be sold or restructured.”

Rabbani's words have once again shattered the illusion of Iran's economic prosperity over the years, suddenly increasing the country's financial burden and necessitating timely measures to mitigate the damage.

"The factories need to be restructured, except for those in the military and railway industries. Others should introduce private capital and hire professional agents for management. Those that need to be restructured should be restructured, and those that need to be sold should be sold."

As soon as Nasser al-Din finished speaking, the bronze lamps in the council chamber flickered in the draft. Rabbani, the edges of the factory roster he was clutching, were damp with sweat. He lowered his head and read out the most difficult problem: "Shah, the textile factories in Isfahan have three thousand workers. Last week, some people used their looms to pay for their bread. If we sell them hastily, it might incite a popular uprising."

Shahryar suddenly said, “I have a solution. British trading posts along the Persian Gulf are in dire need of wool. Why don’t we have the textile factories stop producing fine cloth and switch to weaving coarse blankets? We can then have the customs take the lead in bartering—exchanging three blankets for a load of wheat. This would not only avoid transportation losses but also shut up the members of parliament who are ‘selling resources cheaply.’”

Naserdin nodded. "Let's do it that way. Besides, the charter should serve its purpose."

Everyone knows that in order to maintain national stability, it is necessary to use the guarantees of the charter, but for the sake of the country, this is perfectly reasonable.

(End of this chapter)