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Iranian currency reform hits healthcare system - ASHARQ AL-AWSAT English Archive
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A picture taken on September 30, 2012 shows an Iranian woman paying with a 20000 rial banknote, bearing a portrait of Iran's late founder of Islamic Republic Ayatollah Ruhollah Khomeini, to a grocer in the Iranian capital Tehran. Iran’s central bank on July 6, 2013 drastically devalued the national currency's fixed subsidized rate against the dollar, as the Islamic republic struggles to shore up its faltering economy (AFP PHOTO/ATTA KENARE)

A picture taken on September 30, 2012 shows an Iranian woman handing an IRR 20,000 banknote bearing a portrait of the late founder of Islamic Republic, Ayatollah Ruhollah Khomeini, to a grocer in the Iranian capital, Tehran. On July 6, 2013, Iran’s central bank drastically devalued the national currency’s fixed subsidized rate against the dollar, as the Islamic republic struggles to shore up its faltering economy (AFP PHOTO/ATTA KENARE)

London, Asharq Al-Awsat—Attempts by the Iranian government to reverse the collapsing value of the Iranian rial have led to serious impacts on the national healthcare system, leaving many Iranians struggling to pay for medicines in the wake of reforms to Iran’s subsidy system.

While Iranians are free to trade their currency for US dollars at an unregulated, fluctuating rate in the open market, Iran’s central bank also posts official exchange rates, which once differed according to the nature of the imported goods.

Imports of food and medicines were conducted at subsidized rates of around IRR 12,000 to USD 1. However, this rate was abolished last week, and a new rate of IRR 24,777 to the dollar for all goods was introduced at the start this week.

Iran’s parliament approved the removal of the old subsidized exchange rate on the condition that the government compensate patients and the Health Ministry, the country’s biggest importer of medicines, for the rise in prices.

However, the details of the compensation have yet to be worked out, with officials offering different suggestions of how the response will be implemented.

Mohammad Hossein Qorbani, a member of the Iranian parliament’s healthcare committee, told the Fararu news website: “According to the annual budget law, the government will offer compensation for the price difference between the subsidized and traded dollar in the form of medicine subsidies.”

“However, the parliament does not approve of cash compensation because it will lead to uneven distribution of money in the system,” Qorbani said.

In a bid to tame inflation, the Iranian authorities have also made stringent efforts to control growth of the money supply in the country.

Having ruled out direct cash payments, the government was exploring other options, Qorbani said.

“A national health insurance [scheme] would be the best option to solve the medicine subsidies problem,” he added. “But the Health Ministry and Social Security Organization could not execute the necessary means.”

Qorbani also suggested that private insurance companies could play a role in the government’s plans to pay the compensate patients. However, some reports indicate that several insurance companies have refused to refund policyholders fully for medicines that have experienced a 40 to 90 percent price rise.

The sudden changes in the dollar rate, coupled with the effect of international sanctions, have led to dramatic increases in the costs of medicines in Iran, with some sources saying prices have risen by an average of 76 percent over the past year.

On Iran’s unofficial currency market, the rial has been strengthening after last year’s collapse. Following the introduction of the new official rate, the rial rose to IRR 33,700 to the dollar on Monday, up from from 33,950 on last week.

Since the presidential election in mid-June, the rial has appreciated by 7.5 percent, from a near-record low of IRR 36,000 to the dollar in the months prior to Hassan Rouhani’s first-round victory.

Asharq Al-Awsat

Asharq Al-Awsat

Asharq Al-Awsat is the world’s premier pan-Arab daily newspaper, printed simultaneously each day on four continents in 14 cities. Launched in London in 1978, Asharq Al-Awsat has established itself as the decisive publication on pan-Arab and international affairs, offering its readers in-depth analysis and exclusive editorials, as well as the most comprehensive coverage of the entire Arab world.

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