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Iran's Central Banker Says Subsidies For Imports Have Failed To Keep Prices Low

Abdolnaser Hemmati, Governor of Central Bank of Iran. File photo

The head of Iran’s Central Bank has said that subsidized dollars for imports of essential goods, including medication and food has failed to stem the tide of rising prices in the country.

As the Iranian currency began to devalue one year ago, the government and the central bank decided to offer the U.S. dollar at a subsidized, preferential rate of 42,000 rials to selected importers, in order to keep prices low for working class Iranians.

The dollar is currently trading at more than 130,000 rials on the open market in Iran.

The government last year spent around $25 billion dollars from its oil income for these subsidies. In 2019 the government is planning to allocate only $14 billion to help imports of food and medicine because of its reduced oil income.

U.S. sanctions imposed on Iranian trade and especially oil exports last November have cut Iran’s oil exports in half and lower oil prices have not helped Tehran in the process.

Now, the central bank chief Abdolnaser Hemmati says that due to the nature of retail business and the “bazaar” the government’s intervention has not kept prices of essential goods in check. In an Instagram post, Hemmati also hints that officials are reviewing the effectives of the policy.

The government and parliament are considering other ways of making affordable goods available to ordinary citizens, including the distribution of special coupons for people to receive a limited amount of food at lower prices.

In recent months food prices have skyrocketed, with meat prices increasing fourfold and monthly inflation in the sector reaching double digits.