So long as people's purchasing power does not improve, increasing energy prices will not help, a professor of economics at Alzahra University said.
"Under the current conditions that the spending power of households is being eroded by rising living costs, raising fuel prices will exacerbate poverty," Hossein Raghfar told the labor news agency ILNA.
Living costs (in the last two years) have soared five times due to massive volatility in the currency market, he added, stressing that increasing gasoline prices in Iran's oil-based economy will definitely widen the gap between the haves and the have nots.
Each US dollar, which was traded for 42,000 rials in May 2018, now sells for over 110,000 rials, up 63%.
As soon as energy prices rise, inflation and living costs follow suit and families living below the poverty line feel the heat, the former journalist, university lecturer and expert on poverty alleviation said.
The government for months has been mulling over fuel prices to plug its ballooning budget deficit. It is worth mentioning that the lion's share of energy is used by the manufacturing sectors entitled to massive subsidies while selected industries also do not pay tax.
Raghfar is of the opinion that such policies (raising fuel prices to reduce deficit spending) will primarily benefit vested interests with close connections to lawmakers and politicians.
"Ordinary folks have always fallen victim to political ploys," he recalled, noting that over the last three decades, the policies of successive governments have favored influential economic and political lobbies over those who prefer to remain independent. This explains “why those who are not connected to powerful cartels are left behind.”
Assigning Responsibility
Noting that large discrepancies in local fuel prices and those in neighboring countries will encourage border dwellers to smuggle gasoline, he said those who raised forex rates should be blamed for this major scourge eating away at the treasury.
"If the dollar rate was 10,000 rials, a litter of gasoline would cost one dollar, which would be as expensive as in the neighboring states," Raghfar said, reiterating his strong opposition to higher currency rates.
Energy prices are traditionally set by the government in Tehran as is the case in almost all oil exporting countries.
There are many who disagree with Raghfar’s analysis on energy prices. In their opinion cheap domestic energy prices have led to waste and irresponsible increase in domestic energy consumption, namely water, gas and electricity.
Small wonder Iran has become one of the most energy-intensive and unproductive economies in the world!
