Majlis Joint Commission has doubled the resources for the targeted subsidies policy in the next fiscal year’s (March 2021-22) budget.
The Expenditure Committee of the parliamentary commission blueprinted next year’s cash and non-cash payment of subsidies on Saturday; they integrated two income grant plans and added more resources to pay a new round of handouts to the needy, Fars News Agency reported.
Majlis Joint Commission, composed of representatives of all specialized parliamentary commissions, is responsible for reviewing budget bills as well as five-year development plans proposed by the government before they are put to a vote by MPs.
The commission has projected 1,400 trillion rials ($6 billion) in new resources that will be gained from the elimination of subsidized foreign currency at the rate of 42,000 rials per US dollar that is being granted to import essential goods for three years now.
Also known as necessity goods, essential goods are products consumers will buy, regardless of changes in income levels.
In January, the commission voted in favor of changing the foreign exchange rate for the import of essential goods from 42,000 rials to 175,000 rials per dollar, suggesting that the prices of essential imports should be set in accordance with the exchange rate prevailing in the so-called secondary FX market, known by its Persian name Nima.
The real market price of the dollar is around 60% higher.
According to Rahim Zare’, the spokesperson of the commission, the move is aimed at unifying the exchange rates and preventing the supply of imports at free market rate as well as fighting rent-seeking and corrupt practices.
“Importers used to sell their products at prices determined by the free market despite the government’s allocation of subsidized forex at the rate of 42,000 rials per US dollar,” he was quoted as saying by IRNA.
The government’s revenues are projected to increase by 400 trillion rials ($1.55 billion) provided that the commission’s proposal is approved by the parliament.
The government had allocated 738 trillion rials ($3.15 billion) in its budget proposal.
Subsidy Recipients
According to the decision of the commission, 20 million people who have only received the monthly payment of 455,000 rials ($1.92) will see their cash subsidies increase twofold to reach 910,000 rials ($3.87). These 20 million individuals do not receive subsidies under the government’s second subsidy program, i.e. the so-called Livelihood Assistance Program, a cash transfer program introduced last year as compensation for higher gasoline prices.
The first subsidy program known as targeted subsidies authorized the reduction of food and energy subsidies in 2010 and instead allowed the payment of 455,000 rials to each and every Iranian on a monthly basis. The plan has been retained so far, though some people have been removed from the program; close to 78 million Iranians currently receive the monthly cash subsidy under the Targeted Subsidies Policy.
Some 58 million people receive payments under both programs; these people will receive 1.36 million rials ($5.76) per month as a result of the integration of the two programs next year.
A total of 100 trillion rials ($422 million) gained from Targeted Subsidies Policy will be distributed among 10 million people who are now covered by the Imam Khomeini Relief Foundation and State Welfare Organization; it is still unclear whether these subsidies will be in cash or non-cash. If the government decides to pay them in cash, the monthly payment of these 10 million people will increase from 1.36 million rials to 2.2 million rials ($8.92).
Overall resources of targeted subsidies have been projected to stand at 1,400 trillion rials ($5.91 billion); total payments to people will be 1,265 trillion rials ($5.34 billion) and the rest will be at the disposal of the government to distribute among people either in cash or non-cash.
“The revenues that will be gained from changing the foreign exchange rate from 42,000 rials to 175,000 rials per dollar will be between 7,000 trillion-8,000 trillion rials [$30 billion-$34 billion], which must go straight to people’s pockets,” Parliament Speaker Mohammad Baqer Qalibaf said.
“The parliament is determined to do so. We, in Majlis, have placed people’s health, livelihood, fight against deprivation, production and employment on top of our agenda.”
Hosseinali Haji-Deligani, who represents Shahin Shahr and Meymeh County in the parliament, said, “As a result of the commission’s decision, next year’s cash subsidies will double. Cash-subsidy receivers will get 910,000 rials and 48 million of the financially-underserved will see their payments increase to 1.36 million rials.”
The joint commission has agreed in principle to the budget bill for the upcoming fiscal year (to start March 21) submitted by the government of President Hassan Rouhani earlier in December.
Twenty-three members of the commission voted for, 19 voted against and one abstained from voting, IRNA reported.
“The speaker of parliament [Mohammad Baqer Qalibaf] asserted in a closed session that the government and Majlis will work together to provide the needed resources [to balance next year’s budget],” Hossein Goodarzvand Chegini, a member of the commission, was quoted as saying.
The parliamentary approval comes after the budget bill came under fire by experts and even the research arm of Majlis for being “too optimistic” on the side of revenues.
As of Jan. 2, specialized committees have been ironing out the details of the budget, the official added.
In the fiscal 2021-22 budget, the operating budget (including revenues derived mainly from taxation and exports at the disposal of the government) has been projected to stand at 8,413 trillion rials ($35.57 billion)
Add to this, revenues earmarked for ministries and governmental institutions worth 884 trillion rials ($3.73 billion) take the total sum of the general budget to 9,298 trillion rials ($39.41 billion).
The budget of state companies, banks and for-profit organizations has been put at 15,619 trillion rials ($66 billion).
All in all, the ceiling set for the government’s total budget is at 24,357 trillion rials ($10.29 billion).
