London, Asharq Al-Awsat—Iranian President Hassan Rouhani announced the next phase of reforms to the country’s subsidies system on Monday, amid concerns the reforms could lead to a sharp rise in inflation.
Speaking at a press conference after a meeting with senior officials from the Ministry of Agricultural Jihad, Rouhani said his cabinet was implementing the reforms in accordance with the law, and urged wealthier Iranians not to register for new cash subsidies set to begin replacing a system of price controls on basic goods.
“The cabinet will release a clear report where exactly the budget from withdrawn applicants will be spent,” Rouhani added.
While there is agreement across the political spectrum in Iran that the country is finding the burdens of its massive subsidy system increasingly unaffordable, there are also many voices calling for the reforms to be delayed, for both political and economic reasons.
Speaking to Asharq Al-Awsat, Mohsen Ranani, a lecturer of economics at Isfahan University, said: “The cooperation of the people with the cabinet is the key for having a successful economic plan. But President Rouhani’s cabinet also has to stand by its plans to make sure it does not lose people’s trust in the government.”
He added: “I suggest the cabinet postpone its subsidies plan to avoid a considerable increase in the inflation rate. Such high inflation and economic instability will cause people to lose their trust in the cabinet and its economic plans.”
A member of Iran’s chamber of commerce, Asadollah Asgaroladi, warned that the subsidies reform plan threatened to lead to a dramatic increase in inflation.
“The subsidies plan is an inflation-generating plan and the cabinet must postpone its implementation for a year,” he said.
Elsewhere, the head of Iran’s influential Islamic Revolutionary Guard Corps (IRGC) backed the plans, but said the organization would ensure that the ideals of the country’s 1979 revolution were protected.
The commander of the IRGC, Maj. Gen. Mohammad-Ali Jaafari, said in a press conference on Monday: “The IRGC will not turn down cooperation with the cabinet, as IRGC forces are widespread . . . and their huge capabilities can and should serve the public through such cooperation.”
“The IRGC may have some concerns over a few matters and advise the cabinet to make sure all causes of the Islamic Revolution are safeguarded, but this should not be interpreted as opposition to the government,” he added.
Among these was the creation of a “Resistance Economy,” which Jaafari claimed Rouhani’s cabinet would implement with the help of the IRGC.
The concept of “Resistance Economy,” popular among hardliners in Iran, refers to the drive for economic self-reliance introduced by the Islamic Republic’s Supreme Leader, Ayatollah Ali Khamenei. The plan aims to empower the country to withstand foreign economic pressures, especially economic sanctions.
Jaafari said on April 15: “Unfortunately the government has not welcomed the recommendations and actions of the Basij [a volunteer militia administered by the IRGC] regarding ‘the Resistance Economy,’ and we hope that the cabinet will use the successful capabilities of the IRGC and Basij and the great capacity of the people.”
Cash handouts were previously introduced under former president Mahmoud Ahmadinejad as part of a plan to phase out Iran’s costly subsidies on food and fuel, but have been blamed for the high inflation rates—over 40 percent according to some estimates—which the Islamic Republic has experienced in recent years.
In February President Rouhani introduced a food basket scheme for low-income citizens to replace some of the cash handouts.
Iran’s economy has buckled under the strain of oil and trade sanctions imposed by the US and the EU in recent years. This, coupled with high inflation rates, a steady contraction in GDP and rising unemployment, has put ordinary produce and fuel beyond the reach of most Iranians.