The government is planning to give subsidies via credit cards from the beginning of the next Iranian year in March to replace forex subsidies, a deputy minister of economy said.
"Subsidy credit cards will be available by the end of the current fiscal year and will be used by the government for allocating subsidies paid on foreign currency," ILNA quoted Hadi Sobhanian as saying Friday. He did not elaborate.
The forex subsidy ($1=42,000 rials) offered by the former government under Hassan Rouhani is seen as highly controversial by some economists and the Raisi administration.
They claim that that failed policy was oxygen for corruption and rent-seeking that lined the pockets of vested interests at the expense of the public. In fact the case for and against the costly, and now prohibitive, payouts in its entirety has appeared, disappeared and reappeared over the past three decades.
President Ebrahim Raisi has expressed reservations about the highly controversial policy of subsidizing the increasingly scarce foreign currency following the imposition of the economic blockade in 2018 by former US president Donald Trump.
Cheap currency is sourced from oil exports that has diminished to unprecedented levels due to the US economic sanctions and is used only for importing essential goods, pharmaceuticals and machinery.
However, contrary to expectations, the parliament earlier this month opposed the double-urgency motion of a bill on ending use of subsidized currency for importing essential goods. The plan has been postponed after the parliament voted against it, according to Ehsan Khandouzi, the economy minister.
Lawmakers opposing the end of subsidized imports say with the inflation rate officially hovering around 45% and prices of medicine going through the roof, the move would administer another big shock to consumers at large.
Trying Other Options
There has been much talk about making use of credit cards to control the inflationary impact of subsidies given directly to consumers.
"Eliminating subsidies on foreign currency is not intended to cut government support for consumers. The aim is to use an alternative mechanism because the existing procedure has [among other things] led to higher inflation," Sobhanian said.
"Using credit cards would also allow the government to help support domestic producers," he said without providing details.
Iranian banks issue credit cards, debit cards and gift cards, though the first type is a rarity limited to VIPs.
