Pitfalls of economic reform
Economic reform in Iran can appear to be a logical response to a number of national problems. But, what if the reform is politically incompatible with maintaining other priorities? What if you can blame the negative effects of reform on Iran's enemies? This could be a case study to illuminate many facets of Iranian government and politics.Iran’s Plan to Phase Out Subsidies Brings Frenzied Debate
The outside world may be focused on Iran’s intensifying confrontation with the West over its nuclear program. But at home, Iranians are more concerned with an ambitious and risky new effort to overhaul the country’s troubled economy.
If it goes awry, the plan to phase out Iran’s system of state subsidies, which has existed for decades, could profoundly destabilize the government of Mahmoud Ahmadinejad, who has aggressively championed change. But it could also help wean Iran from its dependence on foreign gasoline and insulate the economy from new sanctions — which are a strong possibility if Iran continues to defy Western pressure over its nuclear program...
Lawmakers across the political spectrum have warned of catastrophic price shocks once subsidies are lifted. Conservatives seem deeply worried about the repercussions, with some saying the plan could lead to a crime wave, or worse. Opposition leaders like Mir Hussein Moussavi have begun hinting that the government’s failure to stem economic pain could become their new rallying cry.
There is widespread agreement that selling everyday goods at far below market prices, which costs the Iranian government an estimated $100 billion a year, makes little economic sense. It encourages overconsumption of gasoline and other products, discourages domestic production and makes Iran more dependent on imports... The subsidies are also regressive, because the rich pay the same artificially low prices as the poor...
Mr. Ahmadinejad, not known in the past for favoring strong pro-market medicine for Iran’s ailing economy, has presented the measure as a matter of economic justice. He says half of the money the government saves by eliminating subsidies will go to helping poorer Iranians adjust to higher prices.
But the measure also has clear political motives. The changes would hit hardest at the urban middle class, which has tended to favor Mr. Ahmadinejad’s opponents...
Oddly, one thing that might make subsidies reform easier is more sanctions, the tool most widely discussed by Western leaders as a final option to put pressure on Iran if current nuclear negotiations fail. Economic sanctions... would force down consumption and help the Iranian government’s finances, because there would be no more need to pay for [imports]... That could disguise the pain of subsidies reform, allowing the government to blame the West for any ensuing inflation...
Discord returns over Iran subsidy reform plan
Iranian President Mahmoud Ahmadinejad has reissued a threat to withdraw plans to reform Iran's costly subsidy system, after parliament passed it to the Guardian Council for final approval, Iranian media reported...
"If the bill does not provide the necessary capacities for government to implement it, then we would withdraw it from the parliament," state news agency IRNA quoted Ahmadinejad as saying on Wednesday. "If necessary, we will propose another bill."...
Parliament speaker Ali Larijani said... "From parliament's point of view, work on the bill is over and it has been sent to the Guardian Council," the students news agency ISNA quoted him as saying...
Do you know what What You Need to Know?
Labels: economics, Iran, politics
posted by Ken Wedding @ 5:37 AM
0 Comments:
Post a Comment
<< Home