Poor Families Living in Rural Areas Bear Brunt of Sanctions

EghtesadOnline: Low-income households living in rural areas bear the brunt of US sanctions while high-income families living in both urban and rural areas reaped the benefits of international sanctions’ removal.

News ID: ۷۵۱۳۷۵

31 October 2020

According to a report by the macroeconomics department of the Plan and Budget Organization, the imposition of international sanctions in the early 2010s resulted in a 10-20% decline in the welfare of all income deciles in Iran.

The preliminary nuclear agreement in the Iranian year ending March 2014 and the start of negotiations with world powers and ease of some international transactions benefited households in different income deciles but the real improvement in their spending and welfare was realized in 2016 as sanctions were officially lifted.

The welfare of families living in urban areas improved by 5-10% during the two-year period after the implementation of the Joint Comprehensive Plan of Action.

The sharpest decline has been recorded for food in the households’ consumer basket over the past decade.

Since the year ending March 2017 and the implementation of Health Reform Plan, spending on health began to rise exponentially, particularly in rural areas.

The Health Reform Plan was introduced in 2014 to fulfill President Hassan Rouhani’s election campaign promise of healthcare for all Iranians by 2018 under a nationwide health insurance program.

Government payments, including the payment of cash subsidies and health insurance premiums, have decreased steadily and quickly from the year ending March 2012. As a result, payments at constant prices in the year ending March 2019 reached one-third of what it was in the year ending March 2012.

When constant prices are used, per capita income dropped by 11% over the period. A 15% decline was recorded in per capita income during a single year: during March 2018-19.

Government payments, including cash subsidies, account for 26% of total income of households in the first income decile (those with the lowest income) while it constitutes less than 4% of total revenues of families in the 10th decile (those with the highest income).

Miscellaneous salaries and revenues, which are usually exempt from tax, account for 35% and 41% of the income of high-income families, respectively.

The removal of sanctions, together with economic growth, between March 2016-18 resulted in a considerable improvement in households’ welfare. Job creation and economic growth were apparently the main causes of decline in wealth inequality and poverty then, the report read.