Subsidy Reform Program Contributing to Rapid Rise in Prices
The Governor of the Central Bank of Iran (CBI) Mahoud Bahmani said today that Iran's annual inflation rate for the period ending in Iranian calendar month of Tir (21 June 2011) hit 16.3 percent. The inflation rate in Tir increased by 0.9 percent compared to the previous month [Mehr News Agency, 15 August].
Earlier this month, IMF had praised Iran’s successes in containing inflation in the aftermath of government subsidy removals, keeping it at around 12.4 percent. But today’s announcement by the CBI governor questions IMF’s assertion as too hastily made.
Iran’s economic reform program that started in late 2010 will remove $60 billion in government subsidies a year, or 15 percent of the country’s GDP. The government, however, is paying out nearly $30 billion a year in cash to the great majority of the citizens to cope with the rapidly rising prices that have followed subsidy removals. Even though the subsidy removals would significantly increase the efficiency and competitiveness of the economy, the monthly cash payments are becoming a major cause of inflation.