Iran's Rafsanjani Faces Opposition To Economic Reform

IRANIAN President Hashemi Rafsanjani's economic reforms are prompting more fear and criticism than confidence.

With his country suffering from a cash shortage and raging inflation, Mr. Rafsanjani is trying to boost foreign investment and trade. But the country's religious leader, Ayatollah Ali Khamenei, has been increasingly critical of any Westernization of Iranian society and many Iranians, including most members of parliament, are wary of competition from abroad.

Many people here worry that Rafsanjani's efforts will cause a new surge of inflation that will trigger a social explosion. Late last summer Iranians rioted in several cities to protest high prices for food and other goods.

Rafsanjani believes, according to Iranian journalists, that his liberalization strategy will work, and last month he told reporters that he would seek a second term during June elections. He is at the end of his first four-year term.

"We are building here a totally free economy," says the most senior civil servant at Iran's Foreign Loans and Finance Division.

Despite great disparities in the official and market rates for hard currency - the key to Iran's cash shortage - this official promises that "by March 21 the Iranian currency will have one single floating rate and our entrepreneurs will be allowed to import whatever they want from abroad."

"We believe that free competition is the best stimulus to put the Iranian economy on the right path," he says.

He asserts that the worst inflation is over, because the market has now adjusted to the proposed floating exchange rate. "When the reforms will be totally implemented, prices will decrease."

He says Iran now has a short-term debt of about $4 billion, not including $537 million in development loans from the World Bank that carry a five-year grace period.

To combat a glut of foreign goods on the Iranian market and to stem the flow of money out of the country, the official says, "all credit lines have been frozen until the floating rate is introduced."

Yet Western commercial attaches here believe things may not run as smoothly as as suggested by Rafsanjani and his so-called golden boys who run the Ministry of Economy and Finance.

The main problem lies in the parliament, which is dominated by deputies closely linked to wealthy businessmen. These deputies support free enterprise but are afraid that Rafsanjani's reforms may hurt local business and lead to social disturbances.

Officials in Tehran, for example, recently imported thousands of South Korean-made Hyundai automobiles that were sold to taxi drivers at prices equal to those of Iranian-made cars.

The move infuriated Iranian companies and auto workers.

And some businessmen are used to making huge profits by securing dollars at the official rate of seven tumans to buy goods overseas, and then selling the imports at prices keyed to the free-market currency rate of 150 tumans to the dollar. When the floating rate is introduced this practice will become impossible.

Supreme Leader Khamenei also poses a problem for Rafsanjani. Khamenei has over the past months loudly expressed his anti-Western feelings and has warned the government that he will not accept any compromise on Iran's traditional Islamic values.

Khamenei also insists that the government policy should not harm the poorest classes of the Iranian society.

Many Iranians are puzzled by Khamenei's attitude, since he has had the reputation of being a supporter of the free-market policy.

But an Iranian journalist says "Khamenei may have the ambition to fill [the late Ayatollah Ruhollah] Khomeini's shoes. He therefore patterns his speeches on those of his predecessor."