Mahmoud Ahmadinejad announced that the interference of some in the economy of the country cause disturbances to the economic plans of government.
In the second year of Iranian Subsidy Reform Plan, the Iranian prime minister complaining regarding the situation that the government is not controlling the economy completely.
This is while in all industrialised countries the central bank is independent of government and the parties that govern do not interfere in the decisions that central bank make. This is due to the reason that some parties take advantage of the economy in favour of their party rather than public especially during the elections.
Ahmadinejad believes the best way to combat the sanctions and make the economy less vulnerable is the implementation of the subsidy reform. He also wants the government to be permitted to use the national development chest for production.
According to ISNA news agency, Ahmadinejad said ‘we can only combat the sanctions through complete implementation of subsidies and for doing such a big job, economy needs to be controlled from one side as there is only one driver for a train.’
He added: ‘straight after practicing the plan, some complained that there is no attention to the production; this is while growth in production has been more than services and thus increase in production does not mean injecting cash.’
From an economic perspective, subsidies do not increase the utility for people as subsidy is normally implemented to increase the usage of some productions in order to increase the living standards of a nation. With regards to the subsidy plan of Iran, it was one of the reasons for hyperinflation in Iran and thus comparing the real income to the nominal income, we extract that the nominal income is much higher than real income. As real income measures how many goods we are able to buy with the amount of money we have, thus people are less able to buy their goods with such a very small fraction of income. With regards to the fact that there is the least friendly societies, unions, insurance benefits, child benefit, NHS funding and public services in Iran, providing such a small proportion of subsidy is only tricking people to not complain.
Consequently, many criticizers of this plan believe that subsidy reform is failed. Assemblies and economic criticizers say government infringed the amount of budget that they suggested to be allocated to production sector; and thus by gaining oil dollars they caused ‘inflation stagnancy’.