Iran doubles subsidies amid tightening of US-led sanctions

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iran rial
Photo - Reuters

Iran has announced it is doubling the monthly cash payments to its citizens. The Iranian labour news agency report comes at a time when common Iranians are suffering from soaring inflation and depreciating rial as a result of US-led economic sanctions.

Behrouz Moradi, head of the organisation for targeted subsidies, said the increase will soon be deposited into the recipients’ accounts but added that it cannot be used until the second phase of the government’s subsidies are launched.

The Iranian government’s implementation of the first-stage of targeted subsidies plan came towards the end of 2010 in order to provide its citizens a relief from toughening economic conditions. Tehran offers a very generous food and fuel subsidies to ordinary Iranians which guarantees basic staples at low prices.

After his reelection in 2009, President Mahmoud Ahmadinejad called it the “biggest economic plan of the past 50 years”.

The additional payment will see the vast majority of Iranians receiving around $60 in direct monthly cash payments.

The Islamic Republic recently faced a cut off from global commerce after The Society for Worldwide Interbank Financial Telecommunication (SWIFT), world’s largest electronic payment system, severed 30 Iranian banks that have been blacklisted by the EU under the economic sanctions programme.

Critical decision

Critics of the Iranian president have blasted the new economic plans and accused Ahmadinejad of embarking on ‘a programme of wasteful public spending’ that will lead to inflation of astronomical proportions.

Food and fuel prices have sky-rocketed since reforms were introduced by the Iranian president, pushing many Iranians into deep financial problems. Despite OPEC’s second largest oil producer, the price of petrol has risen three-fold in the country and the cost of gas has gone up by 500%.

Ayatollah Ali Khamenei, Iran’s supreme leader, has given his nod to the targeted subsidies plan last week insisting that the move was an important means of distributing subsidies in a more balanced way.

Iranian government earned a rare praise from the International Monetary Fund (IMF) last year which commended the sanctions-hit government of adopting policies that led to a reduction in fuel consumption and inflationary pressure.

Authorities in Tehran insist inflation has decreased to around 20% but MPs critical of Ahmadinejad government insist the real figure is closer to 50%.

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