Friday, January 15, 2010

Iran’s Government Subsidies to End

The Guardians Council has approved President Ahmadinejad's "Economic Reform Plan" intended to phase out billions of dollars in state subsidies that currently keeps the costs of food and energy low. Under the plan, prices of subsidized goods would be allowed to reach “normal market prices” over the next three to four years. The government has not announced the start date for the reforms.

The Majlis had approved the bill last week after a long and heated debate over its effects during a period of high inflation. The funding for government subsidies eats up 30 percent of the country’s annual budget.


Anonymous said...

uskowi' post is misleading. the subsidies do not end, they become specialized for those in need and low income. The uniform weight of subsides just end and those with less income get more and those with more income get less.

Nader Uskowi said...


Under the plan, the price subsidies would end, period. There wouldn’t be two gasoline prices for rich and poor, for example. The government would institute a new program (cash payment) to help those who cannot afford the expected rapid rise in prices, offsetting part of the rise in prices. This is a serious and long-awaited reform.

The trick would be to keep inflations as low as possible by monetary policies. A quadrupling of gasoline price, for example, will put a upward pressure on all prices. The success of the reform would mainly depend on how the government would manage this problem.

Nader Uskowi said...

Just more details on how the program would work:The price subsidies will all end. The government will open bank accounts for 36 million Iranians to deposit cash every month to compensate (partly) for the expected rapid rise in prices of food and energy. The prices, if the plan works according to its intent, will be floated in the open market.

Anonymous said...

about time too