Iran gov't boosts subsidies without approval

Business Materials 25 March 2012 18:51 (UTC +04:00)

Azerbaijan, Baku, March 25 / Trend M. Moezzi /

Members of Iran's Majlis (parliament) expressed surprise over the executive branch's decision to increase cash subsidy payments to citizens without approval, Mehr news agency reports.

The Majlis did not permit the deposit of additional payments until mid-May, said Elias Naderan. Mr. Naderan said that by depositing money in Iranians' accounts, the administration wants to present the Majlis with an action that can't be undone.

Currently, Iran's year-old targeted subsidies programme payseach citizen about 455,000 rials (about $37) a month while eliminating subsidies for energy and commodities.

The head of Iran's Targeted Subsidies Organisation announced that an additional $23 will be deposited in citizens' accounts as part of the second phase of the program.

But it is unclear how the additional payments will be funded, said Mr. Naderan. In its meetings with the Majlis, President Mahmoud Ahmadinejad's administration was unable to clarify where the money would come from.

Ahmad Tavakoli, another member of Majlis, said he was so surprised by the government's move that he could find nothing to say.

The government was expected to save $54 billion in one year. Instead, it has had to borrow $6.5 billion from the Central Bank of Iran to make the cash payments to its citizens.

The increase in subsidy payments follows two controversialincidents that highlighted how hard it is for the government to make the monthly cash payments.

In mid-March, without any prior warning, the Central Bank of Iran (CBI) withdrew $3.5 billion from banks'accounts for what it called the foreign currency differential. After the banks protested the CBI returned $2.8 billion of the funds it had taken-- about the same amount as what the government pays Iranian citizens for one month of its targeted subsidies program. The central bank has promised to repay the rest of the money it took.

In another incident, Iranians complained about a text message telling them to withdraw from the subsidy program. In response to citizens' protests, Mr. Moradi, the subsidy organization chief, said the word "optional" wasn't included in the message because it was limited to 70 characters.