Backlash Against Banker Pay Puts Iran’s Rouhani on Defensive

  • Entire managerial board of wealth fund resigns over payslips
  • Economic affairs ministry caps monthly salaries at $6,250

Iranian President Hassan Rouhani said salaries that were paid to heads of state-run banking and financial institutions were unfair, seeking to contain public anger that put his administration on the defensive as he prepares to stand for re-election next year.

Four chief executive officers of state-run banks and the management of the Islamic Republic’s $80 billion sovereign wealth fund have resigned or were replaced over the last week after details of their salaries were leaked in May. On Saturday -- the same day Supreme Leader Ayatollah Ali Khamenei demanded “firm” action against “astronomical salaries” -- the minister for economic affairs announced a monthly pay cap of $6,250.

The size of bankers’ paychecks sparked an uproar in the U.S. and some developed economies during the global financial crisis. While modest in comparison to the banking salaries in the West, the income of top Iranian public-sector bankers has been condemned as excessive at a time when the economy is struggling to recover from international sanctions removed in January.

Safdar Hosseini, head of the sovereign fund and a labor minister under the former reformist President Mohammad Khatami, earned more than $220,000 in the 12 months to February, according to a document published by Tasnim News, a semi-offcial, a news agency that reflects the views of hardline opponents of Rouhani.

‘Not Illegal’

Rouhani said on Twitter the payments were “not illegal but neither were they fair” and promised to change existing laws which allowed government-backed banks to pay up to $325,000 to executives. “Wherever negligence and mistakes have taken place, the government will not stutter in its apology to the people,” he said.

The president’s supporters see the pay debate as part of a campaign by hard-line opponents to upset his re-election chances.

“It’s a serious challenge right now, not just for Rouhani but for the whole system,” said Saeed Laylaz, an economist who was an adviser to Khatami. Rouhani’s opponents are seeking to find a “new political crisis every day in order to drag him down and crush his chances,” Laylaz added.

Rouhani said that “unconventional salaries” were not confined to one state institution. The government has started taking the necessary steps to address the issue, he said.

Statistics aren’t available for average public- and private-sector salaries, a spokeswoman for the National Statistics Center of Iran said. Adjusted for exchange rate, Iran’s gross domestic product per capita was a little more than $17,000 in 2015, according to an International Monetary Fund estimate.

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