Iranian MP: Administration faces problem in paying cash subsidies
Azerbaijan, Baku, Jan. 14 / Trend F.Mehdi/
The Iranian administration is facing problem in providing money for paying cash subsidies to the public, MP Abdolkarim Hashemi told the Fars News Agency.
"In such a situation, the second phase of the subsidy reform plan could not be implemented," he added.
"For the time being, the government is providing the necessary money out of sources other than freeing up prices based on the subsidy reform plan," he noted.
On December 25, 2012, the Fars News Agency quoted the chairman of the Iranian parliament (Majlis) planning and budget committee Esmaeel Jalili as saying that implementing the second phase of the subsidy reform plan in Iran would significantly raise fuel prices.
The issue will contribute to more unemployment, economic recession and liquidity accumulation, he added.
The administration's revenues from freeing up prices according to the plan were less than the cash payments, he noted.
The subsidy reform plan pays out $37 to Iranians while eliminating subsidies for fuels and some commodities.
Nearly 74.5 million Iranians receive cash subsidies. So, the government has paid around 746 trillion rials (about $61 billion) as cash subsidies within the past 22 months equalling 15 per cent of the national budget for the current Iranian fiscal year.
When the plan started in December 2010, it was expected to cause about $32 billion in liquidity. However greater demand for the cash subsidies and the government's money borrowed from the central bank to pay for the subsidies led to $45 billion in liquidity.
The government implemented the first stage of its targeted subsidies plan towards the end of 2010 in an attempt to wean the country off food and fuel subsidies. At the time, Ahmadinejad called it the "biggest economic plan of the past 50 years".