DUBAI, April 24 (Reuters) – Iran has stopped providing subsidised dollars for the import of most basic goods, Iranian media reported, a move that could push soaring consumer prices even higher in the run-up to a presidential election in June.
The Iranian rial has lost two-thirds of its dollar value since late 2011 as a result of Western sanctions targeting the banking system and oil exports over Iran’s disputed nuclear activities, putting many Iranians under financial pressure.
Now trading at around 35,000 rials to the dollar, the currency’s slump has fuelled inflation by increasing the price of imported goods.
Since last year, the government had sought to cushion the impact on Iranians by providing subsidised dollars at a rate of 12,260 rials to the dollar for the import of grains, medicines, red meat, chicken, sugar and other essential items.
But the official rate will now only be available for wheat, barley, corn and soybean imports, according to a memo issued this month by the central bank, local media reported this week.
The government’s action is intended to unify a complex system of multiple exchange rates, local media said, and probably also to preserve Iran’s hard currency reserves.
Most imports will now be purchased using currency bought at a government-run ‘exchange centre’, where dollars have sold for around 24,500 rials recently. This will raise import costs.
Critics of President Mahmoud Ahmadinejad have lashed out over the decision. Ahmad Tavakoli, a vocal Tehran lawmaker, said in parliament on Wednesday that meat prices had risen by 60 percent and cooking oil by 35 percent.
‘People can’t eat meat, they can’t eat beans, should they also not eat broth which requires a spoon of oil?’ Tavakoli asked, according to the Mehr news agency.
The price of a kilogram of sugar rose to 22,000 rials on Wednesday from 17,000 the day before, a source in Tehran’s Grand Bazaar said in an email. A 5 kg can of cooking fat was selling for 235,000 rials, up from 177,000 last week.
Some Iranians have turned to cheaper domestic goods, and one shopkeeper said he now sold mostly Iranian-made cooking oil.
Iranians have also begun stockpiling staples such as red meat, potatoes, onions and cooking oil, fearing that higher prices lie ahead, the Ghanoon newspaper reported on Tuesday.
