Subsidy Reform Program Contributing to Rapid Rise in Prices
The Governor of the Central Bank of Iran (CBI) Mahoud Bahmani said today that Iran's annual inflation rate for the period ending in Iranian calendar month of Tir (21 June 2011) hit 16.3 percent. The inflation rate in Tir increased by 0.9 percent compared to the previous month [Mehr News Agency, 15 August].
Earlier this month, IMF had praised Iran’s successes in containing inflation in the aftermath of government subsidy removals, keeping it at around 12.4 percent. But today’s announcement by the CBI governor questions IMF’s assertion as too hastily made.
Iran’s economic reform program that started in late 2010 will remove $60 billion in government subsidies a year, or 15 percent of the country’s GDP. The government, however, is paying out nearly $30 billion a year in cash to the great majority of the citizens to cope with the rapidly rising prices that have followed subsidy removals. Even though the subsidy removals would significantly increase the efficiency and competitiveness of the economy, the monthly cash payments are becoming a major cause of inflation.
14 comments:
Dear oh dear,it really hurts me to say this was bound to happen it will only get worse you shall see.
It was almost 25 when it was slashed and it now fluctuates up and down like all economies... specially after such a dramatic subvention reform.
anon 9:16 I am looking for a name for you.. I let you know when I'm there.
Iran's economy is rapidly developing to the point where prices for food, clothing and other goods will soon match those in e.g. Dubai. Inflation is just a consequence of that development. P.S. inflation measures salary increases too.
Anon. 2:55
You are misstaken. Inflation has nothing to do with a "rapidly developing Economy". It is a question of the amount of money printed by the Government/Central Bank and circulated in the wider economy. Inflation is never healthy for a country unless you have deflation and zero or falling GDP.
When there is no jobs and the ones that do exist are running at 50 per cent with closing of factories due to excessive Chinese imports leading to mass unemployment and government giving handouts to people to sit around is a suicidal recipe for disaster.
Very high inflation rates are the result of wrong monetary policies of the governments. A monthly inflation rate of 0.9%, as is reported by CBI, is simply too high and not acceptable, and cannot be justified by assertions like that the country is developing fast, etc. Many factors involved, but monthly cash handout of nearly $2.5 billion is on top of the list. And that’s the irony: government cash payout accelerates inflation which in turn eats into those very handouts. Not a smart policy.
There is no alternative to subsidy Reform.
you can not pay people to burn cheap benzin
Nader you do not know what you are talking about. I wont get into high theory but let me give you a simple proof. For iran to become as developed as france, its wages, housing rents, food prices etc have to match those in france. Right? You cant call yourself a developed nation when everything in your country is much cheaper than in developed nations. Well it is mathematically impossible to achieve such a result without experiencing greater inflation than france. I could give more complex explanations but i hope this is enough for this audience.
If you are a developed nation, you might have high prices and inflation. But you don’t become a developed nation through high prices and inflation.
I'll try again slowly:
Salaries in Paris are $60,000 per year, rent for a one bedroom in Paris is $2,500 per month, a night out at a restuarant costs $50 . . . However, in less developed Tehran, salaries are $10,000 per year, rent for a one bedroom in Tehran costs $500, a night out at a restuarant costs $8 . . .
If Iran wants to be as developed as France, then the prices have to be much closer. Wages and costs don't change radically as you go from France to Munich to New York to London. They change a little, but they don't drop to a mere fraction.
So, it has to be that if Iran is to develop into a country like France, then Iran's prices have to increase faster than France's prices. Thus Iran has to have inflation. There is no mathematical way around it. Wages have to increase faster, prices have to increase faster, rents have to increase faster . . .
There are more complicated explanations but I picked the simplest and most irrefutable way possible of explaining it to you. Yet you responded with something completely incoherent and nonsensical.
Anon. 2:15
A very interesting analysis specially when you back it up with such a sophisticated mathematical formel! As an example of your theory we can mention Zimbabwe being as advanced as France for having had a very high inflation courtesy of Mugabe's government!
Iran has the wrong system of government for it to develop into a country like France full stop.
France is the most corrupt nation of the world...
Every time a war takes place.. ?? France is occupied and it needs to be saved loool
Every bloody time !
Now they have Mossad agent as President and that is a proven fact.
so please .. should you want to compare.. compare witha real democracy like India or Switzerland... even Canda would be conditionaly acceptable.
Come on how could you be so cruel to to the French ? They are very similar to us you know for starters they love onions and garlic and use aftabeh we are brothers!
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