Azerbaijan, Baku, April 7 / Trend T. Konyayeva /
Despite the Iranian government's attempts, the decision to get rid ofsubsidies will significantly impact inflation in the near future,Professor at Northeastern University Kamran Dadkhah said.
"An aggravating factor will be the removal of subsidies in the comingmonths," he wrote Trend in an e-mail. "The government has taken manysteps to minimize or delay the effect of removing indirect subsidieson prices. Nevertheless, the removal of the subsidies will have aneffect over the next year and accelerate the inflation rate."
The Iranian Central Bank announced this week that the inflation ratefor the Iranian calendar year hit 12.4 percent.
In January, Iranian Central Bank head Mahmoud Bahmani announced plansto reduce inflation to 4 percent.
The cause of inflation is the growth of liquidity, the expert said.
Some economists think that high inflation in Iran is due to PresidentMahmoud Ahmadinejad's wrong economic policy. He lends small and mediumbusinesses enormous finances at low interest rates, subsidizes thepeople, and greatly invests public funds in the industrial sector.
According to experts, oil export revenues are also distributed improperly.
In December 2010, the government announced reduced state subsidiesfor the population. This resulted in a fourfold increase in petrolprices and cuts in bread benefits.
In the long run, Iran has to promote production by engaging in true,as opposed to nominal, privatization and by removing obstacles in theway of private sector investment, Dadkhah said.
Furthermore, Iran has to come to terms with the United States, theWest, and indeed the world. It has to engage in negotiations to removeeconomic sanctions.
Sanctions, although ineffective in changing Iran's political behavior,have been detrimental to its economic well being, he added.
The U.S. and other Western countries accuse Iran of developing nuclearweapons under cover of peaceful nuclear energy program. Tehran deniesthe accusation, saying its nuclear program is exclusively peaceful innature.
Resolutions adopted by the UN Security Council, as well as additionalunilateral sanctions approved by the U.S. Congress and the foreignministers of all EU countries, were primarily directed against thebanking, financial and energy sectors of Iran.
Restrictions imposed by the EU include the ban on the sale ofequipment, technologies and services to Iran's energy sector; the samemeasure refers to the refining industry. New investments in Iran'senergy sector have also been also prohibited as a whole. Because of
lack of investments due to the sanctions, the production capacity isdecreasing, and therefore, Iran cannot effectively increaseproduction.