The government will submit a bill on overhauling the policy of subsidized imports to the parliament in the near future and the latter is ready to start the reform process of this controversial scheme, Alireza Salimi, a parliamentarian, broke the news to Tasnim News Agency.
According to official statistics, a total of 5,000 trillion rials ($17.85 billion) have been spent on the distribution of cheap dollars (at the exchange rate of 42,000 rials per US dollar) among importers of essential goods over the past four year, Hossein Haqgou, an economic analyst, wrote for the Persian daily Ta’adol. A translation of the article follows:
The modus operandi in dealing with the challenge of subsidized foreign exchange rate is currently one of the main hurdles in the way of government decision-making; a litmus test for its efficiency in solving the issues.
Latest figures released by the Islamic Republic of Iran Customs Administration show $8.8 billion have been spent on imports of seven categories of essential goods, namely wheat, oilseeds, unprocessed vegetable oils, barley, animal corn and soymeal, as well as pharmaceuticals and medical devices during the first seven months of the current fiscal year (started March 21), indicating a 25% and 95% increase in weight and value respectively year-on-year.
If the current trend were to persist, $19 billion will be needed for importing essential goods by March 20, 2022, while government resources for procuring subsidized imports do not exceed $11 billion for the year and this will create a deficit of $8 billion.
Clearly, the continuation of the government’s commitment to funding cheap imports is not possible.
The government has two options to deal with the matter. One is to provide subsidized foreign currency by purchasing from market at free rates, which will widen the budget deficit, raise inflation and cause a surge in foreign exchange rate due to new demand created by the government.
The government’s second choice is to have a public discourse about the issue. The government needs to explain to the people that with sanctions and a decline in foreign-source incomes, as well as the fact that the current approach has given rise to corruption, and that it’s not possible to continue in the same vein.
It needs to call for public understanding and mobilize support for a new approach, which could allow the distribution of direct subsidies in exchange for the elimination of subsidized imports until the situation improves.
The government also needs to employ two other approaches simultaneously. First, it must take a positive stance on the Vienna talks [nuclear talks between world powers and Tehran on reviving the Iran nuclear deal] and second, governmental institutions and organizations, including ministries of economy, agriculture and industries, need to cooperate with each other and also work with private sector’s unions and guilds to carry out less-expensive economic reforms. The blame-game must stop. There is no third solution. Note that the first choice is not a solution at all.
