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Iranian Government Grapples With New Subsidies

IRAN -- Food packages for the poor displayed at the mausoleum of the founder of the Islamic Republic Ruhollah Khomeini. May 10, 2020
IRAN -- Food packages for the poor displayed at the mausoleum of the founder of the Islamic Republic Ruhollah Khomeini. May 10, 2020

The Speaker of the Iranian Majlis parliament, Mohammad Baqer Qalibaf, is compelling President Hassan Rouhani to follow a new law that requires the government to provide subsidies for essential goods.

Under the recently-passed law, which the Guardian Council endorsed last week, the government must pay a subsidy to 60 million Iranians by the end of the current Iranian calendar year on March 20, 2021, Majlis' news website reported.

On November 18, the spokesman for the Guardian Council, Abbas Ali Kadkhodai, tweeted that the Majlis amended the parliamentary motion to compel the government to pay Iranians subsidies for essential goods, which the GC endorsed.

The Gurdian Council had previously found the parliamentary bill in contrast with Article 75 of the Iranian Constitution last week, with the bill also containing ambiguities including its lack of funding and financial burden on the government.

After amendments were added to the bill, which eventually received the GC's approval, the Iranian government is now obliged to start paying the required subsidies.

On October 28, the chairman of the Majlis' plan, the Budget and Audit Commission's Hamid Reza Haji Babaei, had told Fars News Agency that the resources needed to implement the newly-passed law amounted to 300 trillion rials (roughly $7.1 billion) and would be covered through franchising government shares.

The bill has faced harsh criticism from President Rouhani's administration. Referring to Qalibaf's support for the motion, Iranian Vice President Eshaq Jahangiri said about the measure, "Some say we should increase customs resources (to provide the subsidy). Whoever says this shows that they have not the slightest knowledge of the economy."

Based on the new law, the government will pay 1,200,000 rials (approximately $28) per month to all members of the first three economic deciles, including those covered by the Imam Khomeini Relief Committee, the Welfare Organization, needy veterans and people with incomes below the minimum wage.

The government is also obliged to pay 600,000 rials (about $14) to each person from other deciles.

The subsidies will not be sent in cash, but rather, according to the spokesman for the parliament's Plan and Budget Commission, Mohammad Mehdi Mofateh, "Under the newly-passed law, money is not given to the qualified people, but they are allowed to buy goods up to 1,200,000 rials (roughly $28)."

To finance the new plan, Mofateh said, "The government can earn 120 trillion rials (about $2.8 billion) from the sale of state-owned industrial factories, 280 trillion rials from selling its shares in banks, and also 180 trillion rials from its shares in refining companies."