Uncertain Fate of the Subsidy Law

Since 2010, Iranian governments have provided monthly subsidies of 40,000 tomans and later 45,500 tomans to over 70 million Iranians. However, based on a recent parliamentary resolution, the number of subsidy recipients is set to decrease starting from July of this year. Specifically, the top three income deciles, earning 35 million tomans or more annually, will be affected by this resolution. Ahmad Alavi, an economist and university professor in Sweden, commented on this parliamentary action to Radio Farda, stating, "There are institutions and organizations that are rent-seeking and they must first be removed from the budget." He believes these institutions do not contribute to added value and use government funds without any clear return. But what is the reason behind the parliament's decision to cut subsidies for the top three income deciles? Gholamreza Mesbahi Moghadam, head of the Parliament's Planning and Budget Commission, mentioned in a televised program on Tuesday night that the parliament has asked the government over the past two years to identify high-income families and eliminate their subsidies. He added, "The resources allocated for targeted subsidies are not sufficient for the vast population receiving these subsidies." He emphasized that the main goal of the subsidy targeting law was to assist low-income families facing financial difficulties. This parliament member noted that the government has not been serious about this issue, stating, "The number of subsidy recipients removed in the past couple of years is very small. For instance, out of 78 million subsidy recipients, only about two million have been removed, but this move cannot lead to any significant change." He pointed out that since the implementation of the targeted subsidy law, 160 trillion tomans have been paid as subsidies. Mr. Mesbahi Moghadam highlighted that the excessive amount of subsidies has led to consequences such as the inability to pay government employees' salaries and a lack of investment. Following these remarks, Ahmad Midari, Deputy Minister of Cooperatives, Labor, and Social Welfare, stated, "Before the implementation of the targeted subsidy law, 510,000 jobs were created annually, but after its implementation, we witnessed a downward trend in job creation, with this figure dropping to 180,000 in 2011, and further declining due to population growth and falling oil prices." Ahmad Midari attributed the unemployment rate in Iran to the halt of construction projects. However, a crucial point in the televised program on Tuesday night was the announcement by the head of the Planning and Budget Commission regarding the end of the targeted subsidy law last year. Gholamreza Mesbahi Moghadam stated, "This year, we had no new provisions for the targeting of subsidies. Therefore, this provision was carefully examined and approved to stop subsidies for families earning 35 million tomans or more annually." The Deputy Minister of Cooperatives, Labor, and Social Welfare also mentioned, "If this law (targeted subsidies) is not revised, the volume of subsidies that must be given to the people will increase every year." Ahmad Midari noted that the volume of subsidy payments is twice that of construction projects this year and added, "This trend is unacceptable for the country." Meanwhile, Alireza Saleh, parliamentary deputy of the Management and Planning Organization, stated on a televised program that the monthly cash subsidy should be reduced from 45,500 tomans to 20,000 tomans.