The administrative government in Iran has introduced a bill in parliament to remove a heavily subsidized exchange rate which is used to fund imports of staples and medicine into the country.
A letter signed by President Ebrahim Raeisi on Wednesday informed the Iranian parliament of the outlines of government’s bill which is aimed at using the resources released by dismantling the subsidy system to support poorer households in Iran.
The bill stipulates that the government will provide up to 270 trillion rials (nearly $1 billion) in cash handouts and other forms of support to Iranian families to compensate them for unwanted consumer price hikes that could be caused by ending the subsidies on foreign currencies.
The government currently allocates billions of dollars worth of hard currency each year to fund imports of medicine and staple grains at an official price of 42,000 for the rial against the US dollar.
That comes as the market price of the greenback in Iran is nearly seven times the official price.
Raeisi held a meeting with senior Iranian economists and former officials on Wednesday to discuss the pros and cons of eliminating the official exchange rate.
Reports said most of the economists attending the meeting had warned that a sudden change in currency policy could cause a major rise in consumer prices and lead to hyperinflation in the country.
One of those economists later told the semi-official Fars news agency that the government plans monthly cash handouts of 1.1 million rials (nearly $4) per person to poorer households to compensate for the potential price hikes.
Raeisi’s letter to the parliament said that dismantling the official exchange rate will create $12.6 billion in new resources for the government to fund the imports of medicine and staple grains.