Iran News ...


7/27/03

Inflation in Iran rises further to 15.8 percent

Inflation in Iran continued its rising trend for the second consecutive year, going up to 15.8 percent in the last Iranian year of 1381 (ended March 20), with manufactured goods and foodstuff becoming costlier, IRNA reported from Tehran.

Reflecting the increased cost of living, the general price line, measured by the Wholesale Price Index (WPI), rose by 15.8 percent to 306 points last year as prices of primary articles and fuels continued their upward trend compared to those in the previous year's level.

The final WPI rose by 17.9 percent in `Bahman', the 11th month in Iranian calendar, while the final point-to-point inflation for Tehran was pegged at 16.4 percent.

The province of Gilan ranked first in the list with an inflation rate of 19.6 percent in the year under study.

In Iran, Inflation is mainly caused by banking mismanagement, staggering loan and borrowing, mostly by the state organizations, government's domination of key economic sectors, indiscriminate allocation of subsidy both to the poor and the rich, and government's expansionary policies.

The fixed income group, which includes employees and workers, suffer the most from inflation.

Government has been trying to follow deflationary policies, including raising taxes, issuing participation bonds, and revising banking policies.

Majlis directive bans price rises above 10pc on basic commodities

The MP from the southern city of Masjed Soleyman said here Saturday a Majlis directive has banned any price increases higher than 10 percent on essential commodities.

Also, a member of Majlis Plan and Budget Commission Omidvar Rezaei Mirqaed said the definition of essential commodities is clear and the cabinet will soon ratify the legislation's executive bylaws.

He said the directive also calls for reducing rls 5000 billion from the current expenditures of organizations and allocating the sum to subsidies.

He said that the sources of savings will come from cutting 10 percent of the Majlis, Judiciary and presidential-affiliated bodies' budgets as well as axing five percent from all current budgets of all state-affiliated organs.

The government, the MP added through a "special interpretation" of some of the articles in the Third Five-Year Development Plan (March 2000-March 2005) has already boosted in March some of the prices on services, and goods over the 10 percent limit.

Rezaei-Mirqaed stated that the bill underwent change before being ratified.

Initially it was thought the limit on price increases will also extend to cover all government-produced items and services. "But the bill only was approved for essential goods and rejected for others," he underlined.

Because of the high final costs on some of the items and services and lack of adequate resources for compensation, "there was no choice, but, to repeal the proposed ban on price limits on all the government produced goods and services."

The above legislation aims to rein in inflation and curb price hikes which have been among top priorities of the government and Majlis, albeit many different ways of accomplishing the task have been put forth.

The Management and Plan Organization (MPO) in a bid to control inflation has vowed to cap the increase in state employees salaries at the level of the expected inflation or 14 percent this year.

Presumably any increase of state employees salaries over 14 percent will stoke inflationary pressures in the economy.

Some economists, in addition to regarding salary increases for government employees as inflationary, also attribute inflationary pressures to economy's structural rigidity, lack of gross in the real sector of the economy, weak production of goods and productive services, government borrowing from the central bank, rampant consumption mentality and growth in non-productive sector of the economy.

A Majlis commission has estimated the inflation rate to exceed 21.7 percent.

Government has estimated the rate of inflation in 2002 at 16 percent saying the figure stood at 14.8 percent in 2000 and 11.4 percent in 2001.

The Third Five-Year Economic Development Plan (2000-2005) puts annual rate of inflation at 15.9 percent. Under the plan forecast, the figure stood at 19.9 percent in the year ending March 2001, 17.4 percent in year ending March 2002 and 15.3 percent for year upto March 2003. The figure is expected to be 14 percent the next Iranian year and 13 percent in the year following that.

Based on statistics, released by the CBI, inflation rate was 12.6 percent in the year which ended March 2001 and 11.4 percent in the year after that.

... Payvand News - 7/27/03 ... --



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