Iranian president proposes five-fold increase in cash subsidies

Business Materials 5 May 2013 18:16 (UTC +04:00)

Azerbaijan, Baku, May.5/ Trend F.Karimov/

Iranian President Mahmoud Ahmadinejad has proposed increasing per capita cash subsidies by five folds to reach 2.5 million, the Mehr News Agency quoted head of the Iranian subsidy reform plan headquarters Mohammad-Reza Farzin as saying.

The subsidy reform plan has been welcomed by the public. People want the plan to be continued. The plan saved $17.5 billion in its first year of implementation in 2011-2012, he noted.

The subsidy reform plan pays out 455,000 rials (about $37) to every Iranian, while eliminating subsidies for fuels and some commodities.

Nearly 74.5 million Iranians receive cash subsidies.

When the plan started in December 2010, it was expected to cause about $32 billion in liquidity. But 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 the subsidy reform 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".

It allows the government to gradually slash subsidies on fuel, electricity, and certain goods over the course of five years, with low-income families being compensated with direct cash handouts.

On January 14, MP Abdolkarim Hashemi told the Fars News Agency that the Iranian administration is facing problem in providing money for paying cash subsidies to the public.

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 necessary money out of sources other than freeing up prices based on the subsidy reform plan," he noted.