Rouhani: Subsidy Policy Reform Coming

EghtesadOnline: P resident Hassan Rouhani said Monday the policy of subsidizing basic goods will continue in the coming fiscal (starts March 21), but the manner of allocating subsidized currency could change.

News ID: ۷۴۶۹۶۴

19 March 2019

Addressing reporters after the yearend Cabinet meeting, Rouhani said the “government gave $15 billion for importing basic goods” and the same is likely to happen in the coming fiscal.

"With possible changes in the method [of forex allocation], we will provide $15 billion for importing basic goods in the coming year," Rouhani was quoted as saying, the presidential website reported.

As the currency volatility spread in the summer of last year, the government rushed to fix the USD rate at 42,000 rials on the promise that it can meet all currency needs for imports at that rate. That soon turned out be a major error of judgment, according to Financial Tribune.

As demand for imports at the subsidized rate (which was way lower than the black market rate) shot up overnight, the government panicked only to admit that its latest forex move was futile and cannot deliver.

It created different categories of goods that would be eligible for subsidized foreign currency. One list included import of 25 basic goods that could get currency at preferential rates, another was for imports at the newly created rate called Nima. All unessential consumer goods were told to refer to the free market for their currency needs.

However as it became clear that cheap currency had failed to prevent price shocks for these goods – the inflation rate for some staples even exceed the general inflation at times - calls were made for the reversal of the policy.

In an appendage to the 2019-20 budget bill, the Majlis allowed the government to either issue electronic coupons for subsidized basic goods or compensate the people directly with cash payments.

In the meeting with the press, the president alluded to the economic problems visiting the country after the US decided to walk out of the 2015 Iran nuclear deal and reimpose sanctions that had been lifted as part of the deal.

He said despite the pressures and tensions, the government and the central bank were able to control currency rates to a great extent.

"A power like America along with the Zionists and reactionaries in the region banded to take revenge and force the Iranian people to kneel, But the government did not falter in the face of hostility and always strived to address the people's problems," Rouhani said.

Elaborating on the subject, he said “Enemies wanted to see galloping inflation (in Iran) on a daily basis. We had have some problems in the middle of the year when the monthly inflation reached 7% but was curbed in the month of Dey (Dec.22, 2017-Jan.22) and was lowered to 1.6%"

Legal Pursuit

Rouhani referred to legal cases planned by Iran against the US, saying that his government intends to file new cases in the coming months.

"The vice presidency for legal affairs, the justice and foreign ministers are tasked with filing a lawsuit against all those in the US who are involved in imposing sanctions and piling pressure on the Iranian people. This issue should be referred to courts in and outside the country.”

Rouhani said the American enemies and plotters against Iran should be charged for "crimes against humanity".

The US sanctions are not directed at the government or nuclear technology, but are against the common people, their health, environment, food and medicine, the president added.

Last year Iran took the US to the International Court of Justice for re-imposing sanctions soon after abandoning the landmark nuclear deal in May.

Iran argued that the decision violated the 1955 US-Iran Treaty of Amity.

ICJ judges ruled that the US had to remove "any impediments" to the export of humanitarian goods, including food, medicine and aviation safety equipment.

It did though reject Iran's call for the ICJ to order the reinstated US sanctions to be terminated without delay.

Rulings of the ICJ are binding but the court has no power to enforce them.