September 06-13
Iran will soon stop paying monthly cash welfare hand-outs to citizens who don’t need the aid, the daily Sharq reported Sunday, citing a member of the Majlis.
The change will be implemented at Now Ruz next March 21 and will be described in the budget draft that President Hassan Rohani’s government is to submit in December, said Ali-Mohammad Ahmadi, a member of the Majlis Budget Committee, according to the newspaper.
Such a reduction has been mooted by economists close to President Rohani for months. But no one has addressed the key questions of how many families would be removed from the dole and how they would be identified. This bedeviled the Ahmadi-nejad Administration, which also did not want to make payments to every Iranian.
The government makes monthly payments of 455,000 rials (now worth a mere $14 at the free market exchange rate) to every Iranian citizen who applies. According to state officials, only about a million of Iran’s 76.8 million people do not get the payments.
As originally designed, the subsidies on gasoline, utilities, bread and other items were to be phased out over five years with the money saved from the subsidies to paid out in cash welfare each month. The poorest Iranians were to get the largest payments with declining payments to the better off and no payments to the wealthiest.
But the government had no way to rank individuals by wealth and finally gave up trying. It just made equal payments to everyone. This was an improvement over the old subsidy system, under which the wealthy who used more gasoline and electricity actually benefited more—it was a system of subsidies for the rich. But the new welfare system was extremely expensive and still ended up paying considerable money to people who did not need welfare.
The program was the fulfillment of President Ahmadi-nejad’s 2005 campaign promise to allow poor Iranians to benefit from Iran’s oil wealth through a direct cash payment.
Ahmadi-nejad later asked wealthy Iranians who did not need the payments to voluntarily drop out of the program. But government officials say very few have.
Rohani has said repeatedly that the wealthy should not receive welfare payments, but he has not said how the state can identify the wealthy.
