Iran to Subsidise Food for Poor As Sanctions and Inflation Cripple Economy
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Iran’s parliament on Sunday approved a plan for the country’s poor to receive subsidised food staples from the government, as the Iranian rial continues to weaken under pressure partly caused by international sanctions aimed at crippling Tehran’s nuclear programme.
Iran’s parliament on Sunday approved a plan for the country’s poor to receive subsidised food staples from the government, as the Iranian rial continues to weaken under pressure partly caused by international sanctions aimed at crippling Tehran’s nuclear programme.
The plan, the details of which must still be discussed before final approval, will provide “the most vulnerable groups” with basic commodities – including rice, vegetable oil and meat – every three months, according to a Financial Times report.
Ebrahim Ebrahimi, a representative of President Mahmoud Ahmadinejad, told Iranian journalists that the measure was taken because of a shortage of basic commodities and insisted that there was no economic crisis in Iran.
However, Mohammad Alipour, a member of the parliament’s economic committee argued that the measure was taken because “people’s purchasing power has declined”.
The tightening of international sanctions, which are designed to starve Tehran of funds that might be channelled into expensive nuclear weapons programmes, have caused the rial to fall by about 60 percent and have fuelled already high rates of inflation and unemployment.
Official figures put inflation at 28.7 per cent and youth unemployment at 28.6 per cent – but economists believe the real figures are far higher. In January 2012, the informal, street market rial-to-dollar rate was 16,000 to 1; today it is 37,000 to 1.
Oil revenues, the country’s economic lifeblood, have also been reduced by half in the last year.
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Ezatollah Yousefian Mollan, a lawmaker and member of the parliament’s planning and budget commission, said:
[quote] Never ever before have we seen our money lose so much of its value so quickly, and it has affected out economy. [/quote]
While the government has blamed international sanctions for Iran’s economic woes, opponents of Ahmadinejad assert that his populist economic policies, notably cash handouts, cheap loans and subsidies of staples, are the main reasons for the sharp economic decline over the past year.
More than 40 reform-minded economists released an open letter over the weekend in which they depicted a grim picture of the economy despite record oil revenues over the past seven years, blaming it on the “weak management” of the government of Ahmadinejad.
“Inflation is expected to continue its rising trend [in the coming months], considering the existing foreign currency crisis, the continuation of economic sanctions and the splits in the country’s decision-making system,” the letter said.
The economists called on the government and parliament to tackle sanctions by adopting austerity measures, and by discontinuing populist policies, respecting the independence of the central bank and addressing corruption in the banking system.
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