Iran Gov’t Says More Cuts Likely in Cash Subsidy List
EghtesadOnline: The Ministry of Cooperatives, Labor and Social Welfare will initiate the identification of households belonging to the top three high-income deciles as of Sept. 23 to eliminate them from the list of cash subsidy receivers.
Cooperatives Minister Mohammad Shariatmadari says this will be accomplished in cooperation with Information and Communications Technology Ministry and the Plan and Budget Organization of Iran, ILNA reported.
"Given the economic pressures faced by low- and middle-income families, the measure will be carried out cautiously to reduce the margin of error in selecting households who don’t need cash subsidies," Financial Tribune quoted him as saying.
Noting that each income decile roughly includes eight million people, the minister said, households whose spending exceeds a specified threshold, which will be set according to the findings of the Central Bank of Iran, will be removed from the list of monthly cash subsidy receivers, ILNA reported.
Iranian households living in urban areas spent an average of 393,227,000 rials ($3,449) in the last Iranian year (March 2018-19), 19.3% more than in the preceding year, the latest report by the Statistical Center of Iran shows.
“Food and tobacco” (94,505,000 rials or $828) accounted for 24% of total expenditures, whereas expenditure on “non-food” category stood at 298,772,000 rials or $2,620, accounting for 76% of total spending. Meat accounted for 21% (the biggest share) of the overall urban households’ expenditures in the “food and tobacco” category. Housing and fuel costs had the lion’s share in non-food category with 45%.
Urban households declared they received an average income of 434,905,000 rials ($3,814) last year, which shows an 18.6% rise compared with the previous year. This should be held against the backdrop of a 26.9% inflation rate as reported by the Statistical Center of Iran.
The Iranian Cabinet ratified the implementation of Clause 14 of the Budget Law of the fiscal 2019-20, which pertains to the Targeted Subsidies Law, on July 7.
As per the directive signed by First Vice President Es’haq Jahangiri, related governmental bodies are tasked with identifying and removing households in the top three high-income deciles from the list of monthly cash subsidy receivers.
The Targeted Subsidies Law of 2010 authorized the reduction of subsidies on food and energy, and the payment of 455,000 rials ($4) to each and every Iranian on a monthly basis. The plan has been retained so far and nearly 76 million or 95.21% of Iranians currently receive the monthly grant of cash subsidies.
The expenditure section of the "Targeted Subsidies Law" included in the current year’s budget allows the payment of 411,000 billion rials ($3.6 billion) to monthly cash subsidies, up to 84,000 billion rials ($736.84 million) in cash payments to reduce absolute poverty and the insurance of women who are the primary breadwinners of households, 49,000 billion rials ($429.82 million) to healthcare and 61,450 billion rials ($539 million) for the Guaranteed Purchase of Wheat Program and bread subsidy.
The average annual inflation gap measured by the Statistical Center of Iran among income deciles stood at 3% in the Iranian month ending July 22, indicating no change compared with the previous month.
The average goods and services Consumer Price Index in the 12-month period ending July 22 increased by 40.1% for the first decile (those with the lowest income) whereas it grew by 43.1% for the 10th decile (those with the highest income).
The second and third deciles saw their 12-month average inflation rates grow by 41.3% and 41.2%, respectively, compared with last year’s corresponding period.
The annual inflation rate for the fourth decile increased by 41.1% in the same month, the fifth decile 41%, the sixth decile 40.8%, the seventh decile 41.4%, the eighth 41.5% and the ninth decile 41.9%.
The highest overall CPI (using the Iranian year to March 2017 as the base year) stood at 183.7 for the 10th decile and the lowest index was 178.4 for the first decile.
The year-on-year inflation rates increased by 48% for the first decile during the month under review, 49% for second, 48.8% for third, 48.6% for fourth, 48.5% for fifth, 48.1% for sixth, 48.8% for seventh and eighth, 49.3% for ninth and 50.7% for the 10th decile
Income deciles are groupings that result from ranking either all households or all persons in the population in the ascending order according to income, and then dividing the population into 10 groups, each comprising approximately 10% of the estimated population.