Wednesday, October 20, 2010

Subsidy Reforms: Questions & Concerns

On the eve of the Iranian government’s planned announcement of the start of its subsidy reforms, the country’s minister of commerce has raised some fundamental objections to the plan, questioning government’s assertions that the reforms have been in planning stages for years and that the details of the plan have all been worked out. Yesterday, the government started distributing cash payouts to 80 percent of Iranian citizens, at a rate of $2.4 billion a month, to offset the expected rise in prices. But the minister of commerce was also issuing warnings that replacing old subsidies with the new ones, and postponing simultaneous reductions in government’s expenditures, would create an “avalanche” that would “destroy” everyone.

“On the day the new targeted subsidies starts, we need to start reducing [government’s] expenditures. If we relegate cutting expenditures to a future phase, we would create an avalanche that would destroy us all,” said Minister of Commerce Mehdi Ghaznavi [Mehr News Agency, 19 October].

“The Ministry of Commerce expects that the laws governing targeted subsidies, whose details would apparently be announced by the president next week, should replace subsidy-centered economy with an economy centered on competitiveness,” Ghaznavai added.

“My proposals are these: let’s not replace old subsidies with new subsidies. Instead, let’s [eliminate] all subsidies and lets promote competiveness in the economy and replace enterprise managers with those seeking to generate income for their companies. And instead of producing all goods, let’s produce only those goods that have a competitive advantage,” the commerce minister said.

Sources: Mehr News Agency; Aftab News

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