New Resources Foreseen To Help Fund Covid Aid

EghtesadOnline: Plans to offer financial aid to people hit by the Covid-19 outbreak will be funded from resources other than the Central Bank of Iran, the bank’s governor said.

News ID: ۷۵۱۵۳۶

21 November 2020

In a note on his social media account, Abdolnasser Hemmati referred to the government’s plan to give 10-million-rials each to 10 million households plus the Majlis decision to pay direct subsidies for buying food and staples.

Hemmati said no payments will be made from CBI resources. "Despite the need for financial resources to help meet the people’s needs, the CBI has no choice but to maintain its disciplinary policy and avoid monetary expansion to maintain financial stability," he wrote on Thursday.

The government plans to pay micro-credit loans worth 10 million rials ($40) to 10 million families without fixed wages.

Hemmati said the fresh loans will be sourced from the 750-trillion-rial loan program approved earlier to help lift businesses hit hard by the deadly virus.

Despite the shortage of funds, the CBI announced expansionary fiscal policies in April aimed at propping up businesses by injecting 750 trillion rials ($2.8 billion) into the economy, from which 500 trillion rials were given in loans to SMEs and the remaining to poor families in the form of interest-free micro credit after the pandemic struck.

According to the senior banker, the government will pay the 12% interest that will incur on the loans. Target households are only those who receive the monthly cash subsidy of 455,000 rials per person.

The monthly cash subsidy is paid as per the Targeted Subsidies Law of 2010 which cut energy subsidies and instead allowed payment of 455,000 rials ($1.68 at today’s forex rate) to each Iranian on a monthly basis. The plan has been retained with some changes but most Iranians still receive the money.

In addition to the micro-credit loan, President Hassan Rouhani said Wednesday that the government has prepared another coronavirus relief package to cushion the blow to the underprivileged. “Those who are eligible will each receive one million rials ($4) a month for the next four months,” he said.

One-third of the population, approximately 26 million, are eligible to receive the financial aid until March. The new corona aid programs have been announced as the virus takes a heavy toll ruining livelihoods, jobs and economies across the globe forcing governments to enforce lockdowns and restrictions to curb the unprecedented crisis.

Confirmed coronavirus cases in Iran were reported at 828,000 on Friday, according to the Health Ministry spokeswoman. Sima Sadat Lari was also quoted as saying by ISNA that 43,896 people have died.

Starting from today, the National Coronavirus Taskforce will place ‘red cities’ under full lockdown to contain a third wave of infectious disease that has overwhelmed the healthcare system.

Majlis Role

The parliament is working on a plan to release 300,000 trillion rials ($1.2 billion) in direct subsidies to the lowest strata of the society.

The plan was initially rejected by the Guardian Council that ensures laws are in line with the Islamic Republic Constitution and the Sharia on the grounds that the resources to fund the program were not clear.

However, the parliamentary news agency ICANA quoted Hamidreza Haji Babaee, head of the Budget and Planning Commission of the Majlis, as saying that the Guardians confirmed the bill after MPs specified the financial mechanism for the scheme. The plan would reportedly be financed by selling government shares in state-owned companies.

"The government has so far acquired 340 trillion rials from the sale of assets, which is 220 trillion above the March 2020-21 budget projections," he said.

As per the plan, the government will have to make monthly payments of 1.2 million rials ($4.4) to 20 million people in the three lowest income deciles and who are not covered by any humanitarian and welfare organization, and 600,000 rials ($2.2) to 40 million people of modest means in other income deciles during the second half of the current fiscal (Sept. 22, 2019-March 20, 2021).