Manama/Dubai : A move to slash domestic subsidies for fuel and basic goods will strengthen Iran's economy as the US pushes for tougher sanctions against the country, said Iranian deputy central bank governor Hussain Ghazavi.
"Of course, removal of the energy subsidies makes the government of Iran in a stronger position," Ghazavi said yesterday in an interview with Bloomberg News in Bahrain. The plan will cut domestic fuel consumption, reducing Iran's need to import gasoline, he said.
Iran, the world's fourth-largest oil producer, imports a third of its gasoline because it lacks refining capacity. The US is pressing for new United Nations sanctions against Iran to rein in a suspected Iranian nuclear weapons drive.
Targeted grants
Subsidies have been a tenet of the Islamic regime since it took power in 1979 and accounted for 27 per cent of Iran's economy in 2007. The Iranian government will start to cut the subsidies in September and replace them with targeted grants for the poor, President Mahmoud Ahmadinejad said on Thursday.
The plan, approved under legislation in January, is intended to produce $20 billion (Dh73 billion) in savings the first year, money that would be used to make payments to the poor, improve the welfare system and increase fuel efficiency. The plan aims to yield savings of $100 billion over about two years, the central bank deputy governor said.
"As soon as this plan is implemented, we expect that the total consumption of gasoline will decrease nationwide and that helps us to decrease our dependence on imports of gasoline," said Ghazavi.
