for its program eliminating state subsidies from the economy.
The praise will likely be welcomed by President Ahmadi-nejad. But there is no surprise in the IMF comments since the IMF has been urging Iran to drop subsidies for decades. All around the globe, the IMF has been telling governments that subsidies distort their economies and make their development more difficult.
The IMF, which held consultations in Iran from May 28 to June 9, said Iran achieved “early success in the implementation of their ambitious subsidy reform program” with increases in prices of energy, public transport and bread having removed almost $60 billion of subsidies.
“At the same time, the redistribution of the revenues arising from the price increases to households as cash transfers has been effective in reducing inequalities, improving living standards, and supporting domestic demand in the economy,” the statement said about Iran’s monthly welfare payments to citizens.
The subsidy cuts will temporarily raise the inflation rate, but also improve Iran’s medium-term growth outlook by boosting efficiency in energy use, increasing export revenues and strengthening overall competitiveness, it said. The rate of inflation has been increasing since shortly before the subsidies were eliminated in December.
