Rouhani Cuts Subsidies and Doles to Stabilise Iran Economy

The payments of $18, or 455,000 rials, were introduced by Rouhani’s predecessor Mahmoud Ahmadinejad in 2010 to ease the pain inflicted by the withdrawal of some food and energy subsidies.

Iran has doled out $54 billion in direct payments since the start of the program, Eshagh Jahangiri, the nation’s first vice president, said on March 30, according to the state-run Fars news agency.

In a televised speech in November, Rouhani said his government had inherited $67 billion in debt. He announced plans to rein in benefits and further increase utility tariffs and fuel prices. The moves threaten to erode his popularity in a nation where the average urban family earns $600 a month while in rural areas that falls to $339, according to Iran’s Statistical Centre.

Recession Risk

While increases in consumer prices have slowed, annual inflation stood at just below 20 percent in March from a year earlier, according to an analysis of central bank data. The International Monetary Fund forecasts that Iran’s economy will grow 1.5 percent in the next 12 months after two years of contraction, as long as Rouhani’s attempts to end the nation’s isolation and overhaul the economy continue.

A temporary nuclear deal the government struck with world powers last year should bring as much as $7 billion in sanctions relief. Iran has already accessed more than half of the $4.2 billion in frozen oil revenue to be released as part of the accord, which expires in July. Conservatives have opposed the nuclear concessions and Rouhani’s policy of detente.

Electricity and water prices have risen 20 percent on average since March. On April 25, gasoline prices were raised by 75 percent and diesel by 66 percent, according to the Oil Ministry’s website.