DUBAI: Iran’s parliament voted yesterday to consider suspending plans for further reform of the country’s food and fuel subsidies, with legislators citing economic pain caused by the plunge of the rial currency.
Subsidy reform has been a centrepiece of the economic policies of President Mahmoud Ahmadinejad, so parliament’s vote was a political blow to the president at a time when he faces growing public discontent over the rial’s slide.
Of 240 members of parliament present, 179 voted to consider whether to halt the second phase of subsidy reform, according to the Iranian Labour News Agency. It did not say when the decision would be made.
The reform aims to ease pressure on state finances by cutting tens of billions of dollars from the amount which the government pays to subsidise low consumer prices for food and fuel, while offsetting the impact on Iran’s poorest citizens by giving them monthly cash payments.
“In conditions in which the inflation rate is increasing and the currency market is in disorder, the second phase of this law must be stopped,” said Gholamreza Mesbahi-Moghaddam, head of parliament’s budget and planning committee and author of the motion, according to parliamentary news agency Icana.
The government introduced the first stage of subsidy reform in late 2010. At the time, Ahmadinejad called it the “biggest economic plan of the past 50 years”.
But domestic critics including many members of parliament say the reform has contributed to soaring inflation, which is officially running at around 25 percent, and charge that the plan has been used by Ahmadinejad for his own political benefit, because he can control welfare payments under the scheme.
Parliament’s vote on Sunday was a fresh sign that Western sanctions against Iran, imposed over its disputed nuclear programme, are having a fundamental impact on its economy.
Last week police clashed in Tehran with protesters who were angered by the collapse of the rial, which lost a third of its value against the US dollar over 10 days as the sanctions cut the country’s ability to earn hard currency from oil exports.
Ahmadinejad’s term as president ends in mid-2013 but some analysts think Supreme Leader Ayatollah Ali Khamenei could remove him before then if public discontent continues to worsen.
Jafar Qaderi, spokesman for a parliamentary committee formed to support producers of goods, told Icana the committee would call central bank governor Mahmoud Bahmani and the industry and oil ministers for questioning about the rial crisis yesterday.
Parliament members also want to summon Ahmadinejad for questioning about the rial, but their request must still be approved by a parliamentary supervisory board.
In a speech on Saturday, Ahmadinejad referred to the currency crisis but did not offer solutions.
Reuters
