Source:

March 8, 2010

TEHRAN — Iran’s parliament approved President Mahmud Ahmadinejad’s 2010/11 budget today, state radio reported, but some lawmakers attacked the plan, saying planned cuts in subsidies could spark runaway inflation.

“It was approved,” speaker Ali Larijani said. The Mehr news agency said 151 deputies out of 290 approved the outlines of the budget after making some amendments. Larijani said only 226 members were present at the vote.

A senior official has said the government projects revenues of 596 trillion rials (about $59.6 billion) in fiscal 2010/11, which will result in a $6 billion deficit.

That includes plans to phase out costly subsidies on food and energy during fiscal 2010/11 — which begins March 21 — which the government has already said will add 15 percentage points to its average inflation forecast of 10 percent in 2010/11.

Analysts estimate the cuts could send inflation spiralling back to 30 percent or more and lead to a repeat of rioting seen in 2007.

“Do we have any solution to curb the inflationary impact of this plan to solve the people’s problems?” moderate MP Mostafa Kavakebian said during today’s debate on the budget in parliament, broadcast on state radio.

“According to government officials, the inflation rate in the next year will reach 25 percent, while experts believe it will be higher than this figure.”

Inflation currently stands at 8.9 percent but is on the rise again after coming down from nearly 30 percent since late 2008.

“The government and the parliament spent days on this budget bill…and were aiming at decreasing its inflationary impact as well as increasing the rate of economic growth in the best possible manner,” government representative Ebrahim Azizi said in a speech before the voting took place.