Iran Implements Phased Subsidy Reform to Redirect Support to Low-Income Families
In a significant move to restructure its extensive subsidy system, the Iranian government has initiated a phased plan to redirect cash subsidies towards its most vulnerable citizens. The reform, mandated by this year’s national budget law, focuses on gradually removing cash payments from the top three income deciles by the end of the current Iranian year.
A Gradual and Accelerated Process
According to official statements, the process of phasing out subsidies for higher-income households has gained momentum in recent months. While 750,000 individuals had been removed from the cash subsidy list earlier in the year, the numbers increased dramatically in the months of Mordad and Shahrivar, with over 3 million and approximately 2.8 million people removed, respectively. Cumulative figures indicate that by the end of Shahrivar, subsidies for 6.684 million individuals had been ceased. The government is now tasked with planning for the removal of an additional 12 million recipients to meet its year-end target.
Redirecting Funds for Greater Equity
The core objective of this policy is the reallocation of resources. Officials state that the government currently spends 36 trillion Tomans monthly on cash subsidies for the first to ninth income deciles, in addition to stipends for households supported by welfare institutions. The funds saved from removing the top income brackets are legally required to be redistributed to lower-income families through an electronic goods voucher system, known as “Kalabarg.”
The Minister of Cooperatives has confirmed that the resources from this reallocation will be used to supply essential household goods. Under this new scheme, the subsidy accounts for individuals in the first to third income deciles have been credited with 500,000 Tomans each, while those in the fourth to seventh deciles have received 350,000 Tomans for the purchase of basic commodities.
A Necessary Fiscal Measure
Beyond the goal of equitable redistribution, the subsidy reform is also framed as a necessary response to fiscal constraints. The head of the Targeted Subsidies Organization highlighted that subsidies in their various forms account for 21% of the national budget this year, equivalent to 1,046 thousand billion Tomans. This substantial expenditure occurs as the government navigates challenges such as a shortage of foreign exchange resources and the daily import of 20 million liters of gasoline.
Implementation Challenges
The execution of this wide-ranging reform has not been without its complexities. The distribution of responsibilities across multiple government bodies, including the Ministry of Welfare, the Targeted Subsidies Organization, and the Planning and Budget Organization, has reportedly led to some public confusion and coordination issues. A primary obstacle acknowledged by officials is the absence of a precise and comprehensive database on household incomes, which is crucial for the fair implementation of the plan and has been a point of concern for some citizens.