Jump in Prices Not a Solution

Jump in Prices Not a SolutionJump in Prices Not a Solution

Majlis Speaker Ali Larijani said the proposed fuel price rises in the draft budget bill for the next fiscal year, which starts on March 21, is not an expedient solution in view of the economic hardship facing a large section of the society.

“A jump in prices [of fuels] is not an expedient [solution] now, there must be other approaches like a two-price system for fuels that would not  hurt low-income classes,” IRNA quoted him as saying on Monday.

A 50% increase has been envisages for gasoline in the next year’s budget. Gasoline prices now stand at 10,000 rials or a quarter of a dollar.  

Fuel prices have always been a tricky issue in Iran’s economy as many people’s livelihood gets affected by them.

Enjoying rich natural energy resources, Iran had offered fuel subsidies for many years, making it one of the nations with the cheapest prices.

However, under the Subsidy Reform Plan initiated by President Hassan Rouhani’s predecessor, Mahmoud Ahmadinejad, in 2010, subsidies on food and energy were slashed and every Iranian was paid 455,000 rials, or less than $11, on a monthly basis in cash handouts.

The intended objective for the subsidy reforms went somehow awry as years of sanctions, accompanied with mismanagement during the Ahmadinejad administration led to high inflation, a spike in fuel prices and people’s diminishing purchasing power.

Elected on a promise to roll back the sanctions and promote an open economy in 2013, Rouhani spent most of his first term in office to reach the historic 2015 nuclear deal, officially known as Joint Comprehensive Plan of Action.

But JCPOA did not deliver as intended as well, leaving Rouhani no choice but to plan to significantly increase fuel prices and tax revenues for the next Iranian year.

  Public Discontent

The expected hike and the consequent harsh criticism heaped on Rouhani in the press is regarded as a factor leading to recent wave of discontent among Iranians, which saw some people taking to streets last week to vent their anger.

The protests have turned into political ones since then, with Iranian police saying “agitators” have taken advantage of the legitimate demands of people to pursue their own ulterior agendas.

Larijani called on the government’s economic team to revisit some parts of the proposed budget, saying more economic stimuli must be devised for those who would invest in manufacturing to help generate more jobs.

Last month, Rouhani proposed to the parliament a budget of 3,681 trillion rials (nearly $104 billion at the official exchange rate) for the next Iranian year.

To become law, the draft budget has to be passed by the parliament and approved by the Guardians Council, a clerical body that vets any legislation’s conformity with Islamic principles and constitutional articles.


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