Thursday, March 11, 2010

Majlis Rejects Large Payments to Soften End of Subsidiaries

The Iranian parliament, Majlis, by a vote of 111-105, has rejected President Ahmadinejad’s request for a $40 billion allocation to help people who would be affected when the state subsidiaries end in the new Iranian fiscal year. The Majlis was fearful that the injection of so much cash into the economy would have disastrous inflationary consequences. Ahmadinejad argued that the allocation was needed to soften the political and financial blow when the subsidiaries end.

It was unclear if the no-subsidiary law could now be implemented without the cash allocation provisions. The government can still opt to cut its cash allocation request by half in order to gain the support of Majlis.

Reversing Iran’s economic policy of using the oil revenues to subsidies consumer’s goods has long been regarded as a necessary step to modernize the country’s troubled economy.


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