Subsidy cut will add inflation by max 15%: Iran's CBI

TEHRAN, Apr. 7 (MNA) – The governor of the Central Bank of Iran stated that the subsidy reform plan would add the inflation rate by maximum 15 percent.

Mahmoud Bahmani noted that if the parliament approves the income resulting from the subsidy reform plan to be 400 trillion rials (around $40 billion), the current inflation rate of 10.8 percent would increase to 25.8 percent.

The official annual rate in the world's fifth-largest oil exporter has fallen from a peak of nearly 30 percent late last year, but over the past three months there has been an upward trend.

The inflation rate in the month of Esfand (ended on March 20) reached 10.8 percent in comparison to the previous month, the Central Bank said.

According to the central bank report, the average rate over the last 12 months, compared with the previous year, fell to 11.3 percent from 13.5.

The goal of the subsidy reform plan is to bring prices to their true market level within a five-year period. The plan mainly targets energy prices.

According to the plan, the administration is obligated to reform the energy prices by the end of the fifth development plan (2010-2015).

In a televised speech on March 19, President Mahmoud Ahmadinejad said that the implementation of the plan, based on the ratification of the Majlis, will be detrimental to the nation.

Ahmadinejad’s government has insisted it needs 40 billion dollars from subsidy cuts savings to implement the plan. Majlis approved only $20 billion.