The Iranian economy is based on oil and gas, which earn the country two-thirds of its hard currency. But cumbersome regulations, political uncertainties and legal insecurity are blamed for deterring foreign investment. American sanctions against Iran have also had an impact. Attempts at privatisation during Hashemi Rafsanjani's administration met with little success. The national currency, the rial, is weak, the budget deficit is soaring and inflation is acute. Unemployment is officially 12%, but unofficially much higher. Iran has been trying to boost its non-oil exports but without much success. Non-oil exports are believed to be below $5bn a year. President Khatami and his reformist supporters have not concentrated on economic policy, giving priority instead to political and cultural development. They say that in order to ensure economic development the right political atmosphere must exist. But their conservative rivals say ordinary people are more concerned about inflation and unemployment and hope to make political capital from the widespread economic hardship.
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