Costing Iran’s Treasury $1.3 Billion Monthly - Rouhani’s First Political Defeat
After weeks of unrelenting and aggressive media campaign, enlisting celebrities, sports heroes and religious figures, Rouhani administration could not convince Iranians to forego the 445,000-rial ($18) monthly cash handouts to help the country with its financial crisis. Fully 95 percent of citizens, 73 million people, have asked to receive the cash, which will amount to $1.3 billion monthly bill for the government.
Former president Ahmadinejad started the monthly cash handouts in a populist move to supposedly soften the blow of cutting energy and food subsidies. But the program produced 45 percent inflation; eating considerably into the purchasing power of the people it was intended to help. Rouhani, highlighting the fact and figures, hoped to convince people that the program was a bad idea. But neither his charm offensive, nor those of the celebrities whose help he enlisted, could convince the people to forego handouts. The citizens by their choice in effect handed Rouhani his first major political defeat.
The bad news came on the day the government's second phase of subsidy reform went into effect, practically increasing gasoline prices to $1.50 per gallon. The continuation of cash handouts to 95 percent of population and higher gasoline prices could now push the inflation much higher.
The rial, reacting to fear of high inflation, is losing its value against dollar. Meanwhile, the Central Bank of Iran (CBI) announced today that the cost of its basket of consumer and industrial goods is rising at a 32 percent annual inflation rate.