The government may decide to remove certain commodities from the list of imports entitled to subsidized dollar at the rate of 42,000 rials, but it is certain that wheat and medicines will remain in the list until the end of the current fiscal year (March 2022), says the head of parliament’s Budget Reform Committee, Mohsen Zanganeh.
The statement came after the Iranian Parliament last week opposed the double-urgency motion on the elimination of subsidized dollar for importing essential goods, adding it to the parliament’s future schedule.
Lawmakers opposing the cessation of payments of cheap subsidies to importers at the rate of 42,000 rials per US dollar believe that with the inflation rate standing above 45% and prices of some medicines going through the roof, the move would inflict another shock to the economy.
According to the Statistical Center of Iran, the inflation rate increased from 8.2% in the year ending March 2018 to 45.4% in the month ending Oct. 22, 2021.
The annualized inflation rate of food and beverages jumped from 12.3% to 61.4% during the period under review while that of health and treatment services increased from 7.2% in the fiscal 2017-18 to 40.4% in the current year.
A significant deviation from the objectives of allocating subsidies is observed when you compare these figures and this cannot be blamed entirely on sanctions. The government’s cumbersome bureaucratic procedures and extensive rent-seeking activities are partly to blame.
An example can be found in the 2018-19 annual report of the Supreme Audit Court of Iran, the supervisory arm of the Iranian Parliament, saying up to $4.8 billion worth of government subsidies on imports were unaccounted for.
Controversies around subsidized forex will not only remain unresolved but will also prolong when the parliament begins weighing the bill according to its scheduled timeline, the Persian daily Etemad reported.
When the parliament voiced its opposition to the double-urgency plan on terminating subsidized imports, controversies entered a new phase. Not long ago, nearly all experts close to the government and representatives showed supported the plan on the elimination of subsidized forex. There were talks of the government planning the gradual, cautious removal of these subsidies, to which some lawmakers responded by urging the government to go cold turkey.
But on Sunday, suddenly the parliament decided to take time to probe the matter, suggesting that the parliament is still reluctant about the removal of import subsidies despite the government’s economic woes.
Zanganeh says the government does not need the approval of the parliament for the elimination of subsidized import regime, yet it needs the legislative body’s go-ahead to increase the budget ceiling for this purpose.
The Budget Law of 2021-22 has allocated $9-10 billion for the subsidized import of essential goods and pharmaceuticals. The Central Bank of Iran says it provided $9.5 billion for importers of essential goods by Sept. 22, of which $400 million have been spent on the import of vaccines.