Subsidy cuts plan makes a miracle in Iran

Iranian President Mahmoud Ahmadinejad hailed Iran’s courage and proper management of the implementation of the national subsidy cuts plan, and said the move has turned the country into a new emerging economic power in the world.
Ahmadinejad made the remarks in a ceremony held to inaugurate the world’s first solar-gas combined cycle power plant in the central city of Yazd on Monday.

During his remarks, the president hailed the successful implementation of the national subsidy cuts plan, and added, “Officials of the International Monetary Fund (IMF) and the World Bank (WB) have announced that with the implementation of this plan, they are witnessing a miracle in Iran.”

On December 19, Iran began a long-awaited subsidy reforms plan after months of speculation regarding the timing or degree of the subsidy cuts.

The plan included subsidy cuts on energy prices, including the heavily subsidized gasoline prices.

The price of heavily subsidized gasoline (for the first 60 liters purchased by each motorist per month) was increased to 4,000 rials ($0.40) per liter, from 1,000 rials ($0.10) per liter, and all gasoline purchased above the monthly quota was priced at 7,000 rials ($0.70) per liter going forward.

Iranian President Mahmoud Ahmadinejad announced at the time that the launch of his economic reform plan is aimed at overhauling the country’s economy by phasing out energy and food subsidies.

Under the plan all subsidies are to be gradually removed during a five-year period.

The subsidy cuts (also known as targeted subsidies) plan – encompassing key consumer goods such as gasoline, natural gas, and food – is said to be one of the most important undertakings in Iran’s recent economic history.

Before the official announcement of the plan, every family member received a sum of 890,000 rials (approximately $89) in cash subsidies for a two-month period.

Ahmadinejad has also vowed that the Iranian government would tackle economic problems such as housing, unemployment and improve the banking system through the reform plan.

According to the president, the initiative would lead to a better distribution of wealth among the public.

Officials say energy subsidies have cost the Iranian government around 100 billion dollars.

Analysts say that the plan is in line with recommendations from global financial organizations who advise Iran get rid of a heavily subsidized economy if it wants to boost its economic power.