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Iran Daily comments on inflation and price dilemma

Tehran, May 9, IRNA-Inflation in Iran has varied officially between 12 and 16 percent per year for the past decade, though experts say the rates are much higher.

English-language newspaper `Iran Daily' wrote Monday that one of the means by which government is trying to reduce the adverse impact of low earnings is by implementing price controls.

On January 11 the legislature approved a bill to stabilize prices during the current Iranian year, which started March 21.

Based on the ratification, prices of gasoline, diesel, kerosene, furnace oil and other oil products, as well as gas, electricity, water and drainage service charges, phone calls and postal rates in the new Iranian year will remain the same as in the previous year, says an article by Moj news agency.

In subsequent years, prices will be set on the basis of plans presented to parliament each September.

Not everybody has welcomed the idea of price controls, particularly the executive branch and reformist legislators.

Some have described it 'more political than economic'. The pro- reform press has described the price stabilization plan as a measure intended to earn public support during the upcoming presidential election.

Parliamentary speaker Gholam-Ali Haddad-Adel has denounced critics of the bill as 'demagogues motivated by the election'.

Commerce Minister Mohammad Shariatmadari said the price stabilization plan can bear success only if all three branches work within the laws laid down in the fourth five-year economic development plan (2005-2010).

Shariatmadari conceded certain articles of the plan would get in the way of its complete implementation.

Noting that the plan would do little to bring down inflation, the minister said an unbridled rise in liquidity is often the main driving force behind soaring inflation.

"The volume of cash circulating in the market rose by 30 percent towards the end of the year which inevitably sent the prices of certain commodities high, a development totally unrelated in any way to the controversial plan."

Tehran MP Gholamreza Mesbahi-Moqaddam, one of the masterminds of the plan, said after its enforcement, the legislators at least expected the government to assist by executing the necessary restraining measures to prevent the prices commodities that were not included in the plan from rising. "To our dismay, executive bodies, wittingly or unwittingly, performed very poorly."

Mesbahi-Moqaddam was confident that the plan would be a success by keeping the prices under control. "Even the unwanted rise in the prices of other commodities is temporary."

The plan could only be successful if the government and parliament cooperate to make it a success. "We expect the government to actually commit itself to the plan and not cause it to flop.

"Supervisory bodies are also required to do their job properly.

Full cooperation in policies and actions of related organization would keep the prices with the normal range."

Mohammad Khoshchehreh, a member of the Parliament Economic Commission and a proponent of the plan, is also of the opinion that the recent price hikes will be short-lived. "The only positive effect of the whole thing is that it showed to what extent brokers can disrupt the market in the absence of a decisive response by the officials."

Khoshchehreh said the plan has definitely been successful in lowering a general expectation among the public that prices automatically go up at the start of the year.

"It also did well by curbing the prices of of production elements required in generating services and commodities such as water, electricity and gasoline."

This year so far, said the MP, supply has surpassed demand that the possibility is low for the country to run into a shortage of certain items though certain discrepancies have at times upset the distribution system.

Khoshchehreh believed that chaos that has gripped the fruit and vegetable market has been due to lack of supervision to show that the plan had failed. "This was a political move and indicated political interests are more often than not behind economic policies." Unlike those lawmakers who blamed the government for intentionally ruining the plan, Qom MP Mohammad Mir-Mohammadi stated it was wrong to establish a direct relationship between the price of for example tomatoes and that of electricity and/or gasoline.

"It is wrong to say that if the prices of infrastructural services are made stable, others would soar.

"I don't believe that the government has done anything wrong because the executive branch works for the national interest. It is not to the benefit of the government to disappoint the people." He said the plan hasn't failed because the prices of commodities and items included in it have remained the same. "It has yet to show its positive effects and is still too early to conclude whether it has been successful or not," he said.

Rasoul Sediqi, MP from Bonab and a member of the Parliament Planning and Budget Commission, said the prices of fruits and vegetables are affected by market supply and demand. "There is no way to keep them in warehouses. It is true that brokers disrupt the market but this is only part of the problem and the price hike was mainly caused by the distribution mechanism," he said.

The record rise in prices of fruits and vegetables showed that gasoline prices do not always affect inflation.

Accusing the government of politicizing the matter, he said the rise in the prices is natural.

Despite all the hue and cry and contradictory remarks by the officials, there hasn't been an answer as to why the prices soared.

... Payvand News - 5/10/05 ... --

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