Jahangir Amuzegar’s assessments on Iran’s New Subsidy Reform

The hottest economic policy issue in the last two and a half years of the Islamic Republic’s history has been the reform of the much-criticized across the board public subsidies. The issue simmering since the early 1990s has recently come to a boil with the passage of a comprehensive subsidy reform law by the Iranian Consultative Assembly – Majlis – in early January 2010. The law, called by President Mahmoud Ahmadinejad Iran’s “greatest economic project of the last 50 years” is scheduled to go into effect in the second half of the current Iranian calendar year. It promises to have profound and far-reaching implications for such economic indicators as personal savings and consumption, inflation, growth, employment, domestic income distribution, and external trade.
The Issue In A Nutshell

The Islamic Republic has since its birth been an abashed welfare state. By a generous interpretation of its constitution, the government has been engaged in managing the citizens’ life from birth to death – and even beyond. Thus, marriages are assisted by loans or grants to prospective couples; offspring are educated free of charge; school graduates are given jobs; new families are provided with housing; the unemployed poor are placed on welfare; and low or no-cost bank loans are given for purchases of even some discretionary expenditures such as cars, travels, and other items. As part of this welfare policy, the government has also been subsidizing the product… >>>

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