Iran's cash subsidy figure is wrong

Iran Materials 8 December 2011 15:48 (UTC +04:00)

Azerbaijan, Baku, Dec. 8 / Trend M. Moezzi/

Iran's government failed to correctly calculate how much it should pay its citizens in cash subsidies, according to the parliament's special commission on economic reform.

Currently Iran pays about $45 (around 450,000 rials) in cash to each citizen as compensation for a part of commodities and energy subsides which were cut in December 2010.

But this figure was set without the needed calculations to determine income from the targeted subsidies program. Because of this, the government has overpaid $1.5 billion (1.5 trillion rials) in subsidies. Simultaneously, the government is mandated to assign 30 percent of its net income from the subsidies program to the production sector but the overpayment of subsidies to the public means a shortage of funds in other areas. The subsidies for the production sector could not be paid from their assigned source. Instead of using money earned from price increases, the government illegally used funds from the sale of Hormozgan Steel Co.

The targeted subsidies program has paid out more than $25 billion (about 250 trillion rials), on a budget of about $18 billion (180 trillion rials). The $8 billion difference has been borrowed from Iran's Central Bank and must be repaid to the treasury by increasing prices for energy carriers.

The special parliamentary commission for economic reform reported the government faces nearly a $16 billion budget deficit in the current solar year (started on March 20, 2011) to pay out this cash. The commission believes the government has already used oil revenues
illegally to pay for the removed subsidies.