The chairman of parliament’s economic commission in Iran says that the government spends between $80-160 of hard currency monthly for every citizen to subsidize imports of essential goods.
Mohammad Reza Pour Ebrahimi told parliament’s news website it is better to pay this money directly to citizens than giving cheap dollars to importers, and let prices be determined by supply and demand.
Currently the government gives cheap dollars to select importers to bring essential foodstuff and goods into the country, with the expectation to keep prices low for ordinary people. But when goods reach the consumer, prices become inflated, while importers and middlemen profit from the government subsidy.
Pour Ebrahimi added, “In these conditions, to give cheap dollars and people getting high-priced goods does not make sense and we cannot continue this economic path”.
Prices have risen to hyperinflation levels in Iran in the past 12 months, as the United States has reimposed tough sanctions on the country and the local currency has depreciated four-fold against the U.S. dollar.
President Hassan Rouhani’s chief economic official, Mohammad Baqer Nobakht said in 2018 that the government was spending $25 billion dollars annually to subsidize essential imports.
From what is known now about the upcoming new budget, Iran will spend less money this year on subsidies due to dwindling oil revenues. The amounts mentioned range from $13-18 billion.
Last year, the government discovered that in some cases the cheap dollars made available to importers were diverted to bring luxury goods into the country or simply were pocketed.