The Central Bank of Iran has put in place the infrastructure for launching a new mechanism to distribute essential goods eligible for subsidized currency. The system operates using only national ID numbers and/or bank debit cards.
CBI governor Abdolnaser Hemmati had announced earlier on state TV that the regulator’s readiness to create the mechanism for distributing subsidized goods, IBENA reported.
The mechanism was created on the request of the Ministry of Industries to tap into the CBI debit card payment system in cooperation with the Informatics Services Cooperation - a tech company affiliated to the CBI and active in developing banking and payment systems.
Within the framework of the new distribution system goods will be accessible based on national IDs.
Pilot Program in 2 Provinces
Plans are in place to start pilot programs into two provinces, namely Alborz and Tehran. Accordingly, data on families residing in the 2 provinces have been updated and they will soon be able to buy the basic goods at subsidized rates with their debit cards.
The mechanism is prepared for selling red meat in the first stage. Later stages will include other essential goods. Details about the quota for each family will be announced by the Ministry of Cooperatives, Labor, and Social Welfare and the Organization of Targeted Subsidies.
OTC was founded in 2013 as an executive arm for implementing the Law on Targeted Subsidies to gradually phase out the costly food subsidies for high-income groups and increase the same for those at the lower end of the economic ladder.
In addition, the point of sale devices in authorized shops for subsidized goods distributions have also been updated to be able to process customer data using national IDs to determine their eligibility for buying subsidized goods.
Awaiting Ministry OK
According to IBENA, after passing tests the mechanism is now ready to be put into operation, but is still awaiting okay from the Industries Ministry. The ministry has not yet announced the date for putting the mechanism into effect.
After sharp rises in the price of basic goods, particularly meat and chicken, in the past several months, the government decided to sell imported frozen meat at subsidized rates to help provide the needs of low-income families and adjust prices in the open market.
The initiative led to long queues in front of supermarkets leading to growing criticism that the move was in the interest of avaricious rent-seekers wanting to make an extra buck.
It is hoped that the new mechanism would get rid of problems that emanated from the previous measures by enhancing transparency in the distribution system and facilitating delivery of subsidized goods directly to consumers.
When debating the 2019-20 budget in parliament in February, lawmakers obliged the government to allocate $14 billion from oil exports for importing essential goods.
Accordingly, the government is required to allocate forex for importing goods at either subsidized rates or at the Nima rate (integrated forex deals system). In the case of latter, the difference between the Nima rate and the subsidized rate should be paid either in electronic coupon or in cash.
The subsidized rate of one USD is 42,000 rials. Subsidized currency is cheaper than currency sold on Nima where a greenback trades for 90,000 rials. Currency at Nima rates is sold for importing non-essential goods.
Head of Plan and Budget Organization Mohammad Baqer Nowbakhat said in March that government is mulling options for allocating subsidized foreign currency for essential goods.
As for the first option, the government may continue current procedures but under stringent supervision. Within current procedures, companies buy foreign exchange at subsidized rates for importing essential goods.
Additionally, forex based on the Nima rate can be allocated for all essential goods and the difference between the subsidized rates and Nima rate should be paid to the people via electronic coupons. Finally, the government may also pay the difference between the two rates to the people in cash.
