Iran’s Parliament Rejects Ditching Food Subsidy, Fearing Unrest

Parliament has dealt a blow to the Iranian government’s plan to balance its budget by refusing to ditch indirect food subsidies, fearing a public backlash.

Parliament has dealt a blow to the Iranian government’s plan to balance its budget by refusing to ditch indirect food subsidies, fearing a public backlash.

The parliament’s move earlier this week has been described as the most serious confrontation so far between the parliament and President Ebrahim Raisi.

According to the news agency of the Iranian parliament, ICANA, Hamid-Reza Hajibabaei, the chairman of the budget committee of the Majles has said that the parliament has stood by the nation by not letting the government to stop providing cheap dollars to importers for essential commodities such as wheat, sugar and meat.

In January, parliament had already indicated its opposition to scrapping the subsidy.

Iran has spent between 8-14 billion dollars a year since 2018 to offer importers the cheap dollars. This has been a tremendous burden on its finances since US sanctions stopped most of its oil export earnings in dollars. The Raisi government wants to end the practice to balance its budget, but lawmakers say this will boost the already high rate of inflation and could cause unrest in the country.

A nuclear agreement with the United States and an end to oil sanctions can boost revenues and enable the government to keep the indirect subsidy.

In its leading frontpage report, reformist daily Sharq wrote that Planning and Budget Organization Chief Massoud Mirkazemi who went to parliament on Monday to justify the elimination of the preferential rate of exchange came out of the Majles at the close of business tired and frustrated.

One of the lawmakers who supported the elimination of the preferential rate in the next year’s budget, was Alireza Abbasi, the chairman of the Agricultural Committee of the Majles who believed that doing so, will be in the interest of producers of agricultural goods in Iran. He said there are so many loopholes in regulations and traders use them to benefit from the preferential rates while some 80 percent of agricultural producers can never use the advantage.

According to Sharq, Ali Rezaei, the spokesman for the budget committee explained that the reason for the committee’s opposition is that it could lead to social and security problems, meaning that doing away with the preferential rate will lead to an increase in prices that could bring about widespread protests.

He said the Majles has asked the government how it can guarantee that the elimination of the subsidy will not lead to social problems and make life difficult for the people, and the government answered: “Inshallah, God Willing, there will be no problem!” Rezaei added that Majles remains concerned about the problem and its impact on low-income people.

Budget Committee Chairman Hajbabaei on Wednesday described the decision as a determining one. “This is the country’s most important problem, and many Iranians are concerned about it.” He added that “the committee has approved allocating$9 billion dollars in the budget for next year. MirKazemi has said earlier that in the current year there was $8 billion dollars in the budget for purchasing essential commodities, but that amount finished well before the end of the year.

Meanwhile, figures released in September showed prices for essential commodities rose 150 percent, which means doing away with the preferential dollar rate could lead to more price increases.

Sharq has described the difference between the parliament and the government as the first dispute between President Raisi and Majles Speaker Mohammad Bagher Ghalibaf and similar to past instances, Supreme Leader Ali Khamenei will have to intervene to end the dispute. There is still time before the final vote at the Majles on the budget. In the meantime, by leaning to either side, Khamenei will reveal his favorite politician between Raisi and Ghalibaf.

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