“$2.5 billion has been allocated for importing medicine, raw material and medical equipment since the beginning of the current fiscal year in March 2021," a press release on the central bank website said.
"An additional $1.5 billion in subsidized currency was given for importing Covid vaccines and medical equipment," the CBI said without providing details.
Subsidizing currency in its current format was given after the steep rise in forex rates in the spring of 2018 when the previous administration pegged the subsidized dollar at 42,000 rials and cut the list of goods eligible for subsidies to barely a few essential items, including food, medicine and some raw materials.
In the 2021-22 budget the controversial subsidy policy was to last no further than Sept. 21, though the cabinet decided to sustain the policy.
President Raisi instructed the CBI to provide the Health Ministry currency for importing medicine and curb the steep increase in prices.
Local media has reported unprecedented increase in the price of key imported medicine in the past several weeks. The prices of some locally-made medicine have also jumped reportedly due to higher production costs and supply disruptions.
However, Health Ministry officials blame rent-seekers for provoking public concern over the shortage of medicine, especially those needed for serious illnesses.
In the past three years the former government allocated billions in subsidies for importing food and medicine selling the dollar for 42,000 rials.
That rate was almost a seventh of its value in the open market. Fraud and misappropriation of funds during the years were rampant as some big importers, cronies, shell companies in cahoots with vested interests took billions in cheap currency but their imports were close to zero.
Subsidized currency is sourced largely from oil export for importing essential goods, pharmaceuticals and machinery. The subsidy policy was designed to avoid price hikes in food and raw materials and protect consumers against inflation and price gouging almost always blamed on high forex rates.
The Raisi administration, however, decided to put a permanent end to the years-long debate on whether or not to end the increasingly costly and corruption-tainted subsidy policy.
This week it said it would allocate 1,000 trillion rials ($3.4b) to help compensate the elimination of subsidized foreign currency in the 2022-23 budget submitted to the parliament last week.
The government's move is seen by some market observers as the main source of hike in medicine prices. Mohammad Najafi Arab, head of the health commission of the Tehran Chamber of Commerce, Industries and Mines believes that elimination of subsidies would inevitably produce much higher consumer prices.
"The Health Ministry is apparently short of resources for meeting market demand. This has created a black market wherein specific drugs are being sold at exorbitant prices," he told ISNA.
"We have proposed to the government to include medical industries in the list of companies eligible for using Nima platform for currency to minimize the pressure on consumers."
Nima is a secondary market developed by the CBI where companies sell their export earnings at rates lower than the open market and manufactures buy to pay their import bills.